Category Archives: Market Consolidation

10 Key Medtech Themes for 2023

Posted on by • Posted in Aging Population, Antitrust, Artificial Intelligence, Chronic Care Management, Chronic Diseases, Competition, Data Privacy, Data Security, Digital Health, European Medicines Agency (“EMA”), the Medicines and Healthcare Products Regulatory Agency (MHRA), European Medicines Agency (EMA), Federal Trade Commission, Federal Trade Commission (FTC), Food and Drug Administration (FDA), Market Consolidation, Medicines and Healthcare Products Regulatory Agency (MHRA), Medtech, Mergers & Acquisitions, Private Equity, Tech-Enabled Care, Telehealth - Remote Monitoring, Virtual Care Strategy, Virtual Healthcare, Virtual Office, Virtual Visit, Womens Health, Workforce Shortages • Leave a comment

https://medcitynews.com/2023/01/10

We expect 2023 to be a pivotal year for the industry, as the accelerated acceptance of virtual care and demographic trends, such as an aging population, increasing chronic illnesses and healthcare worker shortages, sustain demand for medtech-enabled solutions.

The combination of rapid developments in novel healthcare technology and heightened demand for integrated tech-enabled care has continued to fuel innovation in the medtech industry.  At the same time, medtech innovators – whether in digital health, wearables and AI-driven offerings in healthcare, or diagnostics, telemedicine and health IT solutions – continue to face a patchwork of laws, rules and norms across the world. Life sciences and healthcare innovators and regulators are also looking to medtech to increase access to care and health equity. Here are ten global medtech themes we are tracking in the coming year:

Focus on digital tuck-in acquisitions in medtech M&A

Despite continued uncertainty in the overall financial market, medtech M&A activity continued at a steady pace in 2022.  This year witnessed a rise in tuck-in acquisitions of smaller companies that can be easily integrated into buyers’ existing infrastructure and product offerings, as opposed to significantly sized takeovers of businesses that aren’t squarely aligned with buyers’ existing businesses lines.  Medtech acquirers have been particularly focused on developing their digital capabilities to innovate and reach customers in new ways.  As digitization continues to transform the industry, we expect acquirers to continue to prioritize the value of digital and data assets as they evaluate potential targets.

Continued interest by private equity and other financial sponsors

Private equity firms, healthcare-focused funds and other financial sponsors have continued to display a strong appetite for investing in Medtech companies, with top targets in subsectors such as diagnostics and healthcare IT solutions.  Later-stage medtech companies in particular are gaining a larger share of venture capital funding, as later-stage investments allow financial sponsors to focus on businesses with higher yields, as well as less time to market and capital reimbursement.  Demographic trends, including an aging population and the increasing prevalence of chronic diseases, coupled with healthcare technology advancements have created robust demand for medtech-enabled solutions.  Additionally, medtech offerings have broad applications that can extend beyond stakeholders in a specific therapy area, product category or care setting, offering the ability to satisfy unmet needs with large patient bases.

Strategic medtech collaborations as the new norm

Strategic medtech collaborations and partnerships have become the new norm in our increasingly connected digital healthcare ecosystem.  In response to heightened consumer demand for tech-enabled care, pharmaceutical and medtech companies are collaborating to use digital technologies to engage with consumers, unlocking a vast range of treatments such as personalized medicine.  Additionally, as the market rapidly evolves towards data-driven healthcare, we expect medtech companies to continue to work collaboratively to address existing barriers to data sharing and promote interoperability of healthcare data.

Continued scrutiny by antitrust and competition authorities 

As expected, global antitrust and competition authorities continued to focus on the tech, life sciences and medtech sectors in 2022.  The US, UK and EU authorities have stepped up efforts to investigate and challenge conduct by large pharma and technology companies pursuing mergers and acquisitions.  We expect these authorities to assess similar concerns in the digital health context in an effort to account for the value of combined datasets and the interoperability of various offerings that could be derived from digital health mergers and acquisitions.  Furthermore, geopolitical tensions have resulted in new and expanded foreign investment regimes to improve the resilience of domestic healthcare systems.  Notably this year, the UK government implemented the National Security and Investment Act that allows it to restrict transactions that may threaten national security, including in the AI and data infrastructure sectors.  Sensitive data continues to be a recurring theme for foreign investment review for Committee on Foreign Investment in the US  and that of the EU as well.

Growing importance of data privacy and security

Increasing regulatory attention to sensitive health data and the escalating rise of ransomware attacks has made data privacy and security more important than ever for medtech innovators.  The Federal Trade Commission has issued several statements about its willingness to “fully” enforce the law against the illegal use and sharing of highly sensitive data.  Additionally, several state privacy laws coming into effect in 2023 create new categories of sensitive personal data, including health data, and impose novel obligations on innovators to obtain data-related consents.  As ransomware continues to pose security-related threats, the US Department of Health and Human Services renewed calls for all covered entities and business associates to prioritize cybersecurity.  New standards, such as cybersecurity label rating programs for connected devices, aim to address security risks.  In the EU, medtech providers will need to consider how the launch of the European Health Data Space and newly proposed data regulation, such as the Data Act and AI Act, could impact their data use and sharing practices.

More active engagement with FDA/EMA/MHRA

We expect companies active in the medtech sector, particularly those that make use of AI and other advanced technologies, to continue their conversations with the U.S. Food and Drug Administration (“FDA”), the European Medicines Agency (“EMA”), the Medicines and Healthcare Products Regulatory Agency (“MHRA”) and other regulators as such companies grow their medtech business lines and establish their associated regulatory compliance infrastructure. Given the unique regulatory issues arising from the implementation of digital health technologies, we expect the FDA, EMA and MHRA to provide additional guidance on AI/ML-based software-as-a-medical device and the remote management of clinical trials.  2022 saw stakeholders in the life sciences and medtech industries collaborate with regulatory authorities to push forward the acceptance of digital endpoints that rely on sensor-generated data collected outside of a clinical setting.  As the industry shifts to decentralized clinical trials, we expect both innovators and regulators to work together to evaluate the associated clinical, privacy and safety risks in the development and use of such digital endpoints.

Increasing medtech localization in the Asia Pacific region

2022 saw multinational companies (“MNCs”), including American pharma/device makers make an active effort to expand their medtech business lines in the Asia Pacific region.   At the same time, government authorities in the region have been increasingly focused on incentivizing local innovation, approving government grants and prohibiting the importation of non-approved medical equipment. In light of MNCs’ market share of the medical device market in the Asia Pacific region, especially in China, we expect the emergence of the domestic medtech industry to prompt discussions among MNCs, local innovators and government authorities over the long-term development of the global market for medical technology.

Long-term adoption of telehealth and remote patient monitoring technologies 

The Covid-19 pandemic saw the rise of telehealth and remote patient monitoring technologies as key modes of healthcare delivery.  The telehealth industry remains focused on enabling remote consultations and long-term patient management for patients with chronic conditions.  Looking forward, we expect to see increased innovation in non-invasive technologies that can provide early diagnostics and ongoing disease management in a low-friction manner.  At the same time, we anticipate telehealth companies to face increasing scrutiny from regulatory authorities around the world for fraud and abuse by patients and providers.  Consumer and patient data privacy and security in connection with telehealth and remote patient monitoring continue to remain top of mind for regulators as well.

Women’s health and privacy concerns for medtech

We expect to see increased consumer health tech adoption for reproductive care, especially in light of the U.S. Supreme Court’s decision to overturn Roe v. Wade.  Following the Dobbs decision, a number of states introduced or passed legislation that prohibits or restricts access to reproductive health services beyond abortion.  In response, women’s health-focused companies are expanding their virtual fertility and pregnancy, telemedicine and other services to patients.  At the same time, such companies need to assess the legal risks stemming from the collection and storage of their customers’ personal health information, which could then be used as evidence to prosecute customers for obtaining illegal reproductive health services.  We expect companies active in this space to take steps to navigate the patchwork of data privacy and security laws across jurisdictions while establishing clear digital health governance mechanisms to safeguard their customers’ data privacy and security.

Addressing inequities in the implementation of digital healthcare technologies

Medtech innovators and regulators have been increasingly focused on addressing inequities in the healthcare system and the data used to train AI and ML-based digital healthcare technologies.  In 2022, a number of medtech companies collaborated to provide technologies that result in improved patient outcomes across all populations, as well as boost participation of diverse populations in clinical trials.  In parallel, we are seeing increased interest from regulators to reduce bias in digital health technologies and the accompanying datasets, as evidenced by the EU’s proposed AI Act and the UK’s health data strategy. In the US, which currently lacks comprehensive government regulation of AI in healthcare, there have been increasing calls for institutional commitments in the area of algorithmovigilance.  Because of the inaccurate conclusions that may result from biased technologies and data, MedTech companies must prioritize health equity in the implementation of digital healthcare technologies so that everyone can benefit from the latest scientific advances.

In conclusion, the medtech industry has remained resilient amidst the challenging macroeconomic environment.  We expect 2023 to be a pivotal year for the industry, as the accelerated acceptance of virtual care and demographic trends, such as an aging population, increasing chronic illnesses and healthcare worker shortages, sustain demand for medtech-enabled solutions.  At the same time, the rapidly changing legal and regulatory landscape will continue to be a key issue for medtech innovators moving forward. Adopting a global, forward-thinking regulatory compliance strategy can help MedTech companies stay competitive and ultimately, achieve better outcomes for patients.

2022 Was Hospitals’ Worst Financial Year in Decades, But 2023 Won’t Be Much Better

Posted on by • Posted in Credit Quality, Credit Ratings, Financial Distress, Financial Performance, Financial Pressure, Financial Stewardship, Financial Strength, Financial Viability, Financially Distressed, Health System, Hospital, Hospital Industry, Market Consolidation, Market Outlook, Market Trends, Net Income, Nonoperating Income, Operating Expense Reduction, Operating Expenses, Operating Income, Operating Margin, Operating Metrics, Operating Performance, Operating Revenue, Rural Health, Rural Hospital • Leave a comment

https://medcitynews.com/2023/01/2022

Financial analysts have said that 2022 may have been the worst year for hospital finances in decades. This year looks like it will be yet another year of financial underperformance, with rural providers in especially dire circumstances. 

What’s driving this bleak financial reality? It’s “primarily an expense story,” said Erik Swanson, a senior vice president at Kaufman Hall‘s data analytics practice.

“Growth in expenses has vastly outpaced growth in revenues — since pre-pandemic levels since last year, and even the year prior — such that margins are ultimately being pushed downward. And hospitals’ median operating margin is still below zero on a cumulative basis,” he declared, referring to 2021 and 2020. 

Here’s some context about how dismal this situation is: Even in 2020, a year in which hospitals saw extraordinary losses during the first few months of the pandemic, they still reported operating margins of 2%.

What’s even more disconcerting is that hospitals are underperforming financially pretty much across the board, Swanson said.

For example, the financial reports for the country’s three largest nonprofit health systems — Ascension, CommonSpirit Health and Trinity Health — revealed they are all struggling. Ascension reported a $118.6 million loss in the third quarter of 2022, CommonSpirit posted a $227 million loss, and Trinity posted a $550.9 million loss.

Even Kaiser Permanente, one of the country’s largest health systems with an integrated delivery model, reported a $1.5 billion loss for the third quarter of 2022.

Rural hospitals are in even worse shape, but more on that below.

Other hospitals have been forced to shutter service lines to offset these financial losses. Some are also turning to integration and consolidation.

For example, Hermann Area District Hospital in Missouri said last month that it is seeking a “deeper affiliation” with Mercy Health or another provider. This announcement came after the hospital eliminated its home health agency as a cost-cutting measure. In December, the hospital projected a loss of $2 million for 2022.

We can also look at the mega-merger between Atrium Health and Advocate Aurora Health, which was completed last month. The deal, which is designed for cost synergy, creates the fifth-largest nonprofit integrated health system in the U.S. 

The merger was finalized one day after North Carolina Attorney General Josh Stein expressed concern about how the deal could impact rural communities. He said that while he didn’t have a legal basis within his office’s limited statutory authority to block the deal, he was worried that it could further restrict access to healthcare in rural and underserved communities.

Stein brings up an extremely valid concern. Rural hospitals’ dismal financial circumstances are becoming more and more worrisome — in fact, about 30% of all rural hospitals are at risk of closing in the near future, according to a recent report from the Center for Healthcare Quality and Payment Reform (CHQPR).

A crucial reason for this is that it is more expensive to deliver healthcare in rural areas — usually because of smaller patient volumes and higher costs for attracting staff. Another factor is that payments rural hospitals receive from commercial health plans isn’t enough to cover the cost of delivering care to patients in rural areas, said Harold Miller, CEO of CHQPR. 

“Many people assume that private commercial insurance plans pay more than Medicare and Medicaid. But for small rural hospitals, the exact opposite is true,” he said. “In many cases, Medicare is their best payer. And private health plans actually pay them well below their costs — well below what they pay their larger hospitals. One of the biggest drivers of rural hospital losses is the payments they receive from private health plans.”

In Miller’s view, rural hospitals perform two main functions: taking care of sick people in the hospital and being there for people in case they need to go to the hospital. 

To fulfill the latter job, rural hospitals must operate 24/7 emergency rooms. These hospitals get paid when there’s an emergency, but not when there isn’t — even though the hospital is incurring costs by operating and staffing these units.

“Rural hospitals have a physician on duty 24/7 to be available for emergencies. But they don’t get paid for that by most payers. Medicare does pay them for that, but other payers don’t. If the hospital is doing two different things, we should be paying them for both of those things. Hospitals should be paid for what I refer to as ‘standby capacity,’” Miller said.

He bolstered his argument by pointing to these analogies: Do we only pay firefighters when there’s a fire? Do we only pay police officers when there’s a crime?

It’s also important to remember that rural hospitals are in the midst of transitioning to a post-pandemic environment, now without the pandemic-era financial assistance they received from the government, said Brock Slabach, chief operations officer at the National Rural Health Association. 

“Rural providers are looking to move into the future without the benefit of those extra payments. And they’re in an environment of really high inflation. It’s over 8%, and for some goods and services in the healthcare sector, that’s going to be over 20% in terms of increased prices. Wages and salaries have also gone up significantly. But patient volumes have maintained below average or average. That all presents a huge challenge,” Slabach said.

Rural providers across the country are dealing with the stressors Slabach described and clamoring for more government help. For example, the Michigan Health & Hospital Association sought more money from the state last month after having to take 1,700 beds offline.

Many rural hospitals can’t escape their fate. From 2010 to 2021, there were 136 rural hospital closures. There were only two closures in 2021, and Slabach said 2022 produced a similarly low number. But these low totals are due to government relief, he explained. Slabach said he’s expecting an increase in rural hospital closures in 2023.

When a rural hospital closes, it means community members have to travel far distances for emergency or inpatient care. Miller pointed out another problem: in many rural communities, the hospital is the only place people can go to get laboratory or imaging work done. The hospital might also be the only source of primary care for the community. Shuttering these hospitals would be a massive blow to rural Americans’ healthcare access.

In the face of these potentially devastating blows to patient access, financial analysts’ outlook is bleak. 

Higher inflation and costly labor expenses will continue to have negative effects on hospitals — both rural and urban — in 2023, according to an analysis from Moody’s. Expenses will also continue to increase due to supply chain bottlenecks, the need for more robust cybersecurity investments and longer hospital stays due to higher levels of patient acuity.

All of this doom and gloom begs the question — are any hospitals doing well financially?

The answer is yes, a select few. Let’s look at the three largest for-profit health systems in the nation — Community Health Systems, HCA Healthcare and Tenet Healthcare. As of 2020, these three public health systems accounted for about 8% of hospital beds in the U.S. 

These three systems all had positive operating margins for the majority of the pandemic, including most recently in the third quarter of 2022.

Large public health systems have shareholders to report to and stock prices to worry about. Does this mean they’re more likely to deny care to patients who can’t afford it while other hospitals pick up the slack?

Slabach said it’s tough to say.

“Obviously, hospitals try to mitigate their exposure to risk when it comes to taking care of patients. Most hospitals do a really good job of providing services and care to people who don’t have insurance or don’t have the means to pay. But that gets stressed in this current financial environment. So indeed, there may be instances where what you suggested might happen, but it’s not because they want to deny services or deny care. It’s because they have a bigger picture they have to maintain,” Slabach said.

And the big picture involving dollar signs for hospitals looks pretty bleak in 2023.

New Jersey hospital shifts to freestanding ER after Trinity, Capital Health transaction closes

Posted on by • Posted in Emergency Care, Financial Viability, Financially Distressed, Health System, Hospital, Hospital Industry, Market Consolidation, Mergers & Acquisitions, Outpatient Care, Restructure • Leave a comment
https://www.beckershospitalreview.com/hospital-transactions-and-valuation/new-jersey-hospital-shifts-to-freestanding-er-after-trinity-capital-health-transaction-closes.html?utm_campaign=bhr&utm_source=website&utm_content=latestarticles

St. Francis Medical Center in Trenton, N.J., on Dec. 21 transitioned to a freestanding emergency room that offers various outpatient services after Capital Health acquired the hospital from Trinity Health, according to PBS affiliate WHYY.

The campus, renamed Capital Health – East Trenton, must feature a primary family health clinic and a women’s OB/GYN clinic, according to terms of the transaction. 

Other services, such as cardiac surgery, are moving to Capital Health Regional Medical Center in Trenton, where “extensive capital projects” are being planned, the health system said in a Dec. 8 news release. 

A St. Francis spokesperson told the news outlet that the hospital had been financially struggling for years. 

“St. Francis has done many great things for the Trenton community, but the current healthcare landscape has made it unsustainable,” Capital Health President and CEO Al Maghazehe said. “Without these key approvals, Trenton would have lost desperately needed healthcare services, including emergency services, behavioral health and cardiac surgery.” 

Capital Health said it has taken “a significant risk” to try and prevent a healthcare crisis for Trenton’s 90,000 residents, according to the report.

University of Michigan Health to buy Sparrow Health

Posted on by • Posted in Health System, Hospital, Hospital Industry, Market Consolidation, Market Power, Market Share, Mergers & Acquisitions • Leave a comment

https://mailchi.mp/e44630c5c8c0/the-weekly-gist-december-16-2022?e=d1e747d2d8

Ann Arbor, MI-based University of Michigan Health (UM Health), part of Michigan Medicine, announced last Thursday that it will acquire Lansing, MI-based Sparrow Health System, forming a $7B health system with over 200 care sites across southeast and mid-Michigan. The acquisition will connect Sparrow’s six hospitals to UM Health’s flagship academic medical center (AMC) and sole hospital, while extending the reach of Sparrow’s 70K-member health plan, in which UM Health had previously invested. Pending regulatory approvals, the deal is expected to be completed in the first half of 2023.

The Gist: Given Sparrow’s recent financial struggles—the system announced hundreds of layoffs in September after posting a $90M loss in the first half of 2022—this was a sensible pickup for UM Health, extending its reach into lower-cost community healthcare adjacent to its current market. Other AMCs have made similar moves in recent years, as the differentiated services of an AMC and the local patient reach of community hospitals make for a strong pairing—and this deal will go far toward advancing UM as a truly regional system.

But even if UM Health got a good deal on the acquisition, the current status of Sparrow’s infrastructure and workforce will require considerable investment (UM Health has already committed $800M in the deal’s announcement).

West Coast nonprofit health plans announce agreement to combine

Posted on by • Posted in Health Insurance Industry, Market Consolidation, Market Power, Market Trends, Medicare Advantage • Leave a comment

https://mailchi.mp/e44630c5c8c0/the-weekly-gist-december-16-2022?e=d1e747d2d8

Two nonprofit insurers, Long Beach, CA-based SCAN Group and Portland, OR-based CareOregon, have agreed to merge. The new organization—which will take the name HealthRight Group, while retaining the SCAN and CareOregon brands in local markets—will have $6.8B in annual revenue and cover around 800K lives.

Continuing their previous areas of focus, SCAN will cater primarily to Medicare Advantage (MA) beneficiaries, and CareOregon will prioritize serving managed Medicaid enrollees. Executives from both companies cited scale as the primary motivation for the merger, with the companies aiming to both strengthen their foothold in current markets and expand their reach into new ones.

The deal, which still needs approval from state regulators, is expected to close in 2023.

The Gist: HealthRight stands to be a strong player in the booming government-backed, managed care market in states currently dominated by large payers like Kaiser Permanente and UnitedHealthcare. 

SCAN has differentiated itself with services dedicated to underserved populations, including creating a MA plan designed for LGBTQ+ seniors, and offering California’s only integrated dual-eligible, special needs plans. We expect the addition of CareOregon’s 319K managed Medicaid members to provide a larger platform for these targeted initiatives, and we wouldn’t be surprised to see more nonprofit insurers joining forces with HealthRight to better compete with current market heavyweights.  

Atrium and Advocate Aurora complete merger

Posted on by • Posted in Health System, Horizontal Consolidation, Horizontal Integration, Horizontal Merger, Horizontal Mergers, Hospital, Hospital Industry, Joint Operating Agreement, Market Consolidation, Market Power, Market Trends • Leave a comment

https://mailchi.mp/3a7244145206/the-weekly-gist-december-9-2022?e=d1e747d2d8

Charlotte, NC-based Atrium Health and Downers Grove, IL- and Milwaukee, WI-based Advocate Aurora Health have formally combined to become the nation’s fifth-largest nonprofit health system. Taking the name Advocate Health, the $27B system will control 67 hospitals across six states in the Midwest and Southeast. The merger, announced in May of this year, unites the systems on even footing, with equal representation on a new board of directors, and a co-CEO arrangement for the first 18 months. The Atrium, Advocate, and Aurora brands will continue to be used in their respective local markets.

The Gist: Structuring Advocate Health as a joint operating agreement, and creating a new superstructure atop the two legacy systems, should allow the combined entity more flexibility in local decision-making, while still potentially generating cost savings from back-office efficiencies. 

While we expect these kinds of mega-mergers between large regional systems to continue, it remains to be seen whether the newly combined systems can successfully create value by building larger “platforms” of care to win consumer loyalty, deploying digital capabilities, attracting talent, and becoming more desirable partners for nontraditional players. 

Why large health insurers are buying up physicians

Posted on by • Posted in Antitrust, Competition, Federal Trade Commission (FTC), Health Insurance Industry, Market Consolidation, Market Power, Market Share, Mergers & Acquisitions, Monopoly Behavior, Physician, Physician Strategy, Physician Workforce, Vertical Consolidation, Vertical Integration, Vertical Merger • Leave a comment

https://mailchi.mp/3a7244145206/the-weekly-gist-december-9-2022?e=d1e747d2d8

An enlightening piece published this week in Stat News lays out exactly how UnitedHealth Group (UHG) is using its vast network of physicians to generate new streams of profit, a playbook being followed by most other major payers. Already familiar to close observers of the post-Affordable Care Act healthcare landscape, the article highlights how UHG can use “intercompany eliminations”—payments from its UnitedHealthcare payer arm to its Optum provider and pharmacy arms—to achieve profits above the 15 to 20 percent cap placed on health insurance companies.

So far in 2022, 38 percent of UHG’s insurance revenue has flowed into its provider groups, up from 23 percent in 2017. And UHG expects next year’s intercompany eliminations to grow by 20 percent to a total of $130B, which would make up over half of its total projected revenue.

The Gist:

The profit motive behind payer-provider vertical integration is as clear as it is concerning for the state of competition in healthcare. 

UHG now employs or affiliates with 70K physicians—10K more than last year—seven percent of the US physician workforce, and the largest of any entity. 

Given the weak antitrust framework for regulating vertical integration, the federal government has proven unable to stop the acquisition of providers by payers. Eventually, profit growth for these vertically integrated payers will have to come from tightening provider networks, and not just acquiring more assets. That could prompt regulatory action or consumer backlash, if the government or enrollees determine that access to care is being unfairly restricted.

Until then, the march of consolidation is likely to continue.

‘What they’ve done is extremely evil’: Hospital closures spark questions about private equity in healthcare

Posted on by • Posted in Hospital Closure, Market Consolidation, Operating Expense Reduction, Operating Expenses, Operating Income, Operating Margin, Operating Metrics, Operating Performance, Operating Revenue, Private Equity • Leave a comment
https://www.beckershospitalreview.com/finance/what-theyve-done-is-extremely-evil-hospital-closures-spark-questions-about-private-equity-in-healthcare.html?utm_medium=email&utm_content=newsletter

Private equity has piled into healthcare in recent years, but one company’s recent moves have some questioning whether it belongs in the industry.

Los Angeles-based Prospect Medical Holdings has come under fire for shuttering hospitals and service lines across multiple states after paying itself and shareholders $457 million from a $1.1 billion loan in 2018, CBS News reported Dec. 6. The company paid the loan by selling assets to a healthcare real estate trust.

Prospect Medical then turned around and leased the same assets from the trust, resulting in $35 million in annual rent charges.

The company began cutting services earlier in 2022 at the 168-bed Upper Darby, Pa.-based Delaware County Memorial, the report said. The hospital’s emergency department closed in November.

“What they’ve done is extremely evil, in my words,” emergency nurse Angela Neopolitano, who worked at Delaware County Memorial for 41 years, told CBS News. “To gain a dollar, you maybe destroyed lives, maybe even ended lives, because they can’t get the help they need.”

Paramedics in the hospital’s system at one point found that the credit cards used to refuel their ambulances had been disabled because Prospect Medical “didn’t pay their bill,” Ms. Neopolitano told CBS News.

Delaware County officials said Prospect Medical told them labor costs, inflation and strain from the pandemic all fed into its decision to cut services, the report said.

“I had the sense they were not giving us all the information,” county official Monica Taylor told CBS News.

The Pennsylvania Office of the Attorney General has filed a petition seeking to have Prospect Medical held in contempt and fined $100,000 per day for violating a court order prohibiting the hospital’s closure pending further order by the court.

Prospect Medical has said it plans to convert Delaware County Memorial into a 100-bed behavioral health facility, the report said.

Walgreens’ VillageMD inks $9B deal to buy Summit Health, marking largest physician deal of the year

Posted on by • Posted in Competition, Health System, Hospital, Hospital Industry, Market Consolidation, Market Trends, Pharmacy, Primary Care, Primary Care Delivery Model, Primary Care Strategy, Retail Clinic, Retail Healthcare, Retail Pharmacy • Leave a comment

https://www.fiercehealthcare.com/providers/walgreens-villagemd-inks-9b-deal-buy-summit-health-expand-healthcare-footprint

VillageMD, which is majority owned by Walgreens Boots Alliance, plans to shell out nearly $9 billion to pick up medical practice Summit Health, the parent company of urgent care clinic chain CityMD.

The deal, announced Monday morning, is valued at $8.9 billion and includes investments from Walgreens Boots Alliance and Cigna Corp’s healthcare unit Evernorth, which will also become a minority owner in VillageMD. Bloomberg first reported on a potential deal back in late October.

The deal will expand Walgreen’s reach into primary, specialty and urgent care. The transaction creates one of the largest independent provider groups in the U.S., the organizations said. Combined, VillageMD and Summit Health will operate more than 680 provider locations in 26 markets. The two companies will have 20,000 employees.

Walgreens said Monday it will invest $3.5 billion through an even mix of debt and equity to support the acquisition, which is expected to close in the first quarter of 2023. The company will remain the largest and consolidating shareholder of VillageMD with about 53% stake.

Walgreens also raised its fiscal year 2025 sales goal for its U.S. healthcare business to between $14.5 billion and $16 billion from $11 billion to $12 billion previously. That business segment is now expected to achieve positive adjusted EBITDA by the end of fiscal year 2023. 

Last year, Walgreens invested $5.2 billion in VillageMD and said it planned to open at least 600 Village Medical at Walgreens primary-care practices across the country by 2025 and 1,000 by 2027.

The deal comes amid a frenzy of M&A activity in the past two years. Major retailers like CVS, Walgreens and Amazon are ramping up their focus on providing medical services to gain bigger footholds in the healthcare market.

Drugstore rival CVS Health won the bidding war for home health and technology services company Signify Health and plans to shell out $8 billion to acquire the company. Amazon also plans to buy primary care provider One Medical for $3.9 billion.

The M&A move signals that Walgreens wants to become a “dominant entity in the overall healthcare services ecosystem,” according to David Larsen, healthcare IT and digital health analyst at financial services firm BTIG.

“Walgreens Boots Alliance is graduating up from being a drug retail store to owning the life-cycle of members’ health,” he wrote in an analyst’s note. “We view this transaction as being a statement by the market that primary care continues to be one of the key drivers of healthcare long-term.”

The deal also will put additional pressure on CVS Health to break into the primary care business “sooner rather than later,” Larsen wrote. 

“I think at the most strategic level, I think there continues to be recognition that an integrated, coordinated, connected model of care is one that will ultimately deliver the best results. You see this through Optum’s acquisition of Kelsey-Seybold Clinic and VillageMD’s acquisition of Summit Health,” Tim Barry, CEO and chair of VillageMD, said in an interview with Fierce Healthcare.

“If we’re going to ultimately stem the rising tide of this fee-for-service healthcare system, we need a better solution, and that solution needs to have doctors working with other doctors in a coordinated way and trying to solve the unique problems that these patients have and making sure that the right doctors are accessing the patient at the right time, and doing it all underneath the umbrella of a risk-based contract,” Barry said.

He added, “We think that this is going to continue to be where healthcare goes. And, we have to do it in a way that is integrated and value-oriented. Any organization focused on doing that, and doing that at size and scale, is going to continue, I think, to be the successful winners of our healthcare system.”

In 2019, Summit Medical Group, a physician-owned and governed multispecialty group, merged with CityMD, a leading urgent care company in New York City. The combined organization, Summit Health, has more than 370 locations in New Jersey, New York, Connecticut, Pennsylvania and Oregon.

VillageMD provides value-based primary care for patients at traditional free-standing practices, Village Medical at Walgreens practices, at home and via virtual visits. VillageMD and Village Medical have grown to 22 markets and are responsible for more than 1.6 million patients, according to the company.

Barry said the combination of VillageMD and Summit Health-CityMD will enable the organizations to scale up value-based care and build out integrated primary and specialty care services.

“If you look at the long history of Summit Health, it’s an organization that has done some very innovative things. The way that they deliver multispecialty care, it is truly integrated, it’s truly connected and they are known as the preeminent brand in their marketplace. They also have CityMD, which is one of the more unique and differentiated urgent care models out there in the market. They really are a best-of-breed organization,” he said.

“When I look at what we’ve been able to do at VillageMD, we built this incredible model of value-based primary care delivery. The idea of bringing these two organizations together to bring those best-of-breed capabilities under one umbrella was just so compelling. We will soon be able to offer a more comprehensive, integrated and connected model by also offering other specialty services to our patients, but all still done through a value or risk-based reimbursement structure.”

Barry is bullish on the combined capabilities of the two companies in the primary and specialty care markets. 

“We’ll be delivering a consistent value-based model of integrated, multispecialty care in a way that delivers the best clinical results on the planet,” he said.

Jeff Alter, CEO of Summit Health-CityMD, said in a statement that the deal adds Summit Health’s expertise and geographic coverage to VillageMD’s proven value-based primary care approach.

The acquisition also expands Walgreens’ reach into providing medical care directly to patients. “This transaction accelerates growth opportunities through a strong market footprint and wide network of providers and patients across primary, specialty and urgent care,” Roz Brewer, CEO of Walgreens Boots Alliance, said in a statement.

With Cigna’s investment, the combined company will be able to tap into Evernorth’s health services capabilities to potentially lower healthcare costs, Barry said. Evernorth encompasses Cigna’s health services businesses including pharmacy benefit manager Express Scripts  

“In order to be a risk-based provider or a value-based provider, you have to have contracts with a payer that allows you to work in this value or risk-based construct. We learned over the years that Cigna has been a really good partner to us on that journey,” Barry said. 

“There are companies that [Cigna] has purchased over the years that have different specializations and capabilities that we believe ultimately will allow us to deliver better care to our patients,” he noted. “Evernorth has some capabilities tied to behavioral health, and they have some capabilities tied to the management of specialty pharmaceutical spend, which everyone knows those costs continue to be soaring. We both liked the idea of supporting an organization like ours that’s going to continue to grow and continues to be focused on risk and value.”

With the investment in VillageMD and Summit Health, Cigna gets a leg up in the primary care space as it looks to build out its Evernorth division.

“Our collaboration with VillageMD accelerates our efforts to improve the way care is accessed and delivered,” said Eric Palmer, CEO of Evernorth, in a statement. “Harnessing the breadth of Evernorth’s health services capabilities and connecting them with physicians who provide care in a value-based model like VillageMD, helps more people to get the right care at the right time—driving better health and value.” 

15 hospital, health system sales in the works

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Consolidation continues across the healthcare industry with many hospitals and health systems looking to complete planned acquisitions or sales by the end of 2022 or early 2023. 

Here are 15 planned hospital or health system sales that Becker’s Hospital Review has reported on in the last month: 

1-2. El Segundo, Calif.-based Pipeline Health System, which filed for Chapter 11 bankruptcy in October, has agreed to sell two hospitals — Weiss Memorial Hospital in Chicago and West Suburban Medical Center in Oak Park, Ill. — to Princeton, N.J.-based Ramco Healthcare Holdings and Resilience Healthcare.

Pending approval of a motion submitted Nov. 22 to the U.S. Bankruptcy Court for the Southern District of Texas, Resilience is expected to assume operations of the two hospitals on Dec. 2. 

Since acquiring ownership of the hospitals in 2019, Pipeline said it has invested $60 million to improve facilities, add technology and expand clinical programs. The hospitals employ a combined total of 1,700 employees.

3-4. The Centurion Foundation, an Atlanta-based nonprofit organization, has inked an asset purchase agreement to acquire the CharterCare Health Partners system from Los Angeles-based Prospect Medical Holdings. 

Two hospitals are included in the transaction: Providence, R.I.-based Roger Williams Medical Center and Our Lady of Fatima Hospital. The change in control application process is expected to be submitted to the Rhode Island Department of Health and the state attorney general before the end of 2022. 

5. West Reading, Pa.-based Tower Health plans to sell Chestnut Hill Hospital in Philadelphia to Temple University Health System for $28 million. The news comes less than a year after the health system closed two other hospitals: Brandywine Hospital in Coatesville, Pa., and Jennersville Hospital in West Grove, Pa.

Tower Health plans to rebuild around its flagship Reading Hospital and the two other hospitals it acquired  for $423 million from Franklin, Tenn.-based Community Health Systems: Phoenixville Hospital and Pottstown Hospital. It also owns St. Christopher’s Hospital for Children in Philadelphia in a joint venture with Drexel University.

6. As of Nov. 14, potential buyers can submit offers for Singing River Health System, a three-hospital system with locations in Ocean Springs, Pascagoula and Gulfport, Miss. 

Supervisors from Jackson County — which owns the health systems — gave the green light for proposals to sell Singing River Health System. Potential buyers have until March 10 to submit their bids. 

7-9. New Orleans-based LCMC Health plans to acquire three Tulane University hospitals — New Orleans-based Tulane Medical Center; Covington, La.-based Lakeview Regional Medical Center; and Metairie, La.-based Tulane Lakeside Hospital — from Nashville, Tenn.-based HCA Healthcare.

LCMC Health will purchase the three hospitals for $150 million, expanding its portfolio to nine hospitals in the New Orleans area. The two parties hope to finalize the deal by the end of 2022 or early 2023.

10-12. Peoria, Ill.-based UnityPoint Health – Central Illinois and Des Moines, Iowa-based UnityPoint Health plans to spin off three Illinois hospitals to Urbana, Ill.-based Carle Health.

The transaction results in Carle Health taking over as the parent organization of UnityPoint Health – Central Illinois, which includes Peoria-based Methodist and Procter, and Pekin (Ill.) Hospitals and affiliated clinics, Peoria-based UnityPlace and Methodist College.

An April 1 closing date is anticipated, pending all regulatory approvals.

13. Hill Country Memorial Hospital in Fredericksburg, Texas, has entered into an agreement to become part of San Antionio-based Methodist Healthcare System.

Hill Country Memorial has 15 locations, including a hospital, an urgent care clinic, and primary and specialty care offices. Methodist Healthcare — a 50-50 co-ownership between HCA Healthcare and Methodist Healthcare Ministries of South Texas — has more than 30 facilities, including eight hospitals and nine freestanding emergency departments.

The transaction is expected to be completed in early 2023.

14. Orlando (Fla.) Health plans to acquire Sabanera Health Dorado, an acute care hospital in Puerto Rico. 

The hospital will change its name to Doctors’ Center Hospital-Orlando Health Dorado, according to Orlando Health, which will team up with four additional hospitals operated by the Doctors’ Center Hospital team. The operation of all five hospitals will remain with the Doctors’ Center Hospital group.

15. Tacoma, Wash.-based MultiCare Health System and Yakima (Wash.) Valley Memorial reached an acquisition agreement, according to an Oct. 21 news release shared with Becker’s Hospital Review.

Terms of the agreement include Memorial becoming a wholly owned subsidiary of MultiCare, MultiCare investing in new programs, installing an integrated electronic health record, and providing a sustainable future for Yakima’s only hospital. The transaction is subject to routine regulatory approval and closing conditions.