Tag Archives: M&A

Jefferson CEO Dr. Stephen Klasko renews contract through 2024 — 5 notes from his tenure

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https://www.beckershospitalreview.com/hospital-management-administration/jefferson-ceo-dr-stephen-klasko-renews-contract-through-2024-5-notes-from-his-tenure.html

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Stephen Klasko, MD, president of Thomas Jefferson University and CEO of Jefferson Health, signed another five-year contract with the Philadelphia-based health system, a spokesperson told Becker’s Hospital Review March 20.

Five things to know about the contract and Dr. Klasko’s first five years with Jefferson:

1. Dr. Klasko, who began leading the health system in 2013, will serve as president of Thomas Jefferson University and CEO of Jefferson Health through 2024.

2. Under Dr. Klasko, Jefferson has grown from three to 14 hospitals. Jefferson’s growth has largely taken place by merging boards across regions. The system has pending deals with Philadelphia-based Einstein Healthcare Network and Temple University’s Fox Chase Cancer Center, also in Philadelphia.

3. At the same time, Jefferson Health has gone from a $1.5 billion system to a more than $5 billion system, generating more than $100 million in savings and efficiencies.

4. New philanthropic initiatives led to the Sidney Kimmel Foundation in Philadelphia donating $110 million to Jefferson Medical College in 2014, representing the largest gift in its history. The college was renamed the Sidney Kimmel Medical College that same year.

5. Under Dr. Klasko’s leadership, Thomas Jefferson University now hosts design curriculum for medical students and operates the No. 3 fashion school in the country.

 

 

POPULATION HEALTH TRENDS TO WATCH, TRENDS TO QUESTION IN 2019

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https://www.healthleadersmedia.com/clinical-care/population-health-trends-watch-trends-question-2019?utm_source=silverpop&utm_medium=email&utm_campaign=ENL_190319_LDR_BRIEFING_resend%20(1)&spMailingID=15320844&spUserID=MTY3ODg4NTg1MzQ4S0&spJobID=1601503618&spReportId=MTYwMTUwMzYxOAS2

Healthcare organizations cannot afford to ignore consumers in 2019, as a number of major trends shape the future of care delivery (and a number of other trends warrant more critical thinking).

This article was first published March 18, 2019, by MedPage Today.

By Joyce Frieden, news editor, MedPage Today

PHILADELPHIA — The consumer will be where it’s at for population health in 2019, David Nash, MD, MBA, said here Monday at a Population Health Colloquium sponsored by Thomas Jefferson University.

“Whatever business model empowers the consumer, wherever she is,” including at home, will spell success, according to Nash, who is dean of Jefferson’s School of Population Health. “That’s where population health must go.”

Nash noted that back in 1990, Kodak, Sears, and General Electric were the most important companies in the Dow Jones Industrial Average; all those companies have disappeared or almost disappeared today.

“If we ignore the consumer, it will be at our peril,” Nash said, citing home healthcare, telehealth, and the use of wearables among the trends to watch in the coming year.

Nash, who is a columnist for MedPage Today, also cited these other trends to watch:

  • The growth of Medicare Advantage and managed Medicaid. “These are two programs that are working,” he said. “They’re working because they deliver value — high-quality care with fewer errors — and they follow our mantra: no outcome, no income.”
  • Tax reform. “Whatever your politics are [on this issue], park it at the door,” he said. “The sugar high is over, and now we’re in a carbohydrate coma. We’ve got the biggest deficits in American history; if we continue to spend money we don’t have, what will that do to healthcare? I think it will bite us in the butt when [it] comes to the Medicare trust fund.”
  • Precision medicine and population health. “[There is a notion] that precision medicine and population health are actually kissing cousins,” said Nash. “They are inexorably linked.”
  • Continued deal-making. The CVS/Aetna, UnitedHealth Group/DaVita, and Humana’s deals with Kindred Healthcare and Curo Health Services are just some of the more recent examples, he said. And he noted, the healthcare company formed by Amazon, Berkshire Hathaway, and JPMorgan Chase now has a name: Haven. “It’s a place where they’re going to figure it all out and they’ll let us know when they do.”
  • Continued delivery system consolidation. “Big surprise there,” he said sarcastically. “The real question is will they deliver value? Will they deliver synergies?” Nash noted that his own institution is a good example of this trend, having gone from one or two hospitals 5 years ago to 16 today with another two in the works.
  • Population health technology. “The gravy train of public money into this sector will [soon] be over; now the real challenge is for the IT [information technology] systems on top of those legacy companies; can they create the patient registry information and close the feedback loop, and give doctors, nurses, and pharmacists the information they need to improve care?”
  • The rise of “population health intelligence.” “That’s our term for predictive analytics, big data, artificial intelligence, and augmented intelligence … It says we don’t want to create software writers — we want doctors, nurses, pharmacists, and others who can glean the usable information from the terabyte of information coming our way, to [know how to interpret it].”
  • Pharmaceutical industry disruption. “This is really under the thumb of consumers … It’s all about price, price, price,” Nash said. “We’ve got to find a way to rationalize the pricing system. If we don’t, we’re going to end up with price controls, and as everybody in this room with a background in this area knows, those don’t work either.”
  • More venture capital money. Nash described his recent experience at the JPMorgan Chase annual healthcare conference, where people were paying $1,000 a night for hotel rooms that would normally cost $250, and being charged $20 just to sit in the lobby of one hotel. “What was going on there? It was more private-sector venture money coming into our industry than ever before. [These investors] know that when there’s $1 trillion of waste in an industry, it’s ripe for disruption.”
  • Workforce development. This is needed for the entire industry, said Nash. “More folks know a lot more [now] about population health, quality measurement and management, Lean 6 Sigma, and improving processes and reducing waste. The only way we’re going to reduce that waste of $1 trillion is to have the right kind of workforce ready to go.”

Lawton Burns, PhD, MBA, director of the Wharton Center of Health Management and Economics at the University of Pennsylvania here, urged the audience to look critically at some of these possible trends.

“You need to look for evidence for everything you hear,” said Burns, who coauthored an article with his colleague Mark Pauly, PhD, about the need to question some of the commonly accepted principles of the healthcare business.

Some of the ideas that merit more critical thinking, said Burns and Pauly, are as follows:

  • Economies of scale
     
  • Synergy
     
  • Consolidation
     
  • Big data
     
  • Platforms
     
  • One-stop shops
     
  • Disruption
     
  • Killer apps
     
  • Consumer engagement

“I’m not saying there’s anything wrong with those 10 things, but we ought to seriously consider” whether they’re real trends, Burns said. As for moving “from volume to value” in healthcare reimbursement, that idea “is more aspiration than reality” at this point, he said. “This is a slow-moving train.”

Burns also questioned the motives behind some recent healthcare consolidations. In reality, “most providers are positioning themselves to dominate local markets and stick it to the payers — let’s be honest,” he said. “You have to think when you hear about providers doing a merger, you have to think what’s the public rationale and what’s the private rationale? The private one is [often] more sinister than you realize.”

“IF WE IGNORE THE CONSUMER, IT WILL BE AT OUR PERIL.”

 

 

 

 

Hospital Mergers Improve Health? Evidence Shows the Opposite

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Hospital Mergers Improve Health? Evidence Shows the Opposite

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Many things affect your health. Genetics. Lifestyle. Modern medicine. The environment in which you live and work.

But although we rarely consider it, the degree of competition among health care organizations does so as well.

Markets for both hospitals and physicians have become more concentrated in recent years. Although higher prices are the consequences most often discussed, such consolidation can also result in worse health care. Studies show that rates of mortality and of major health setbacks grow when competition falls.

This runs counter to claims some in the health care industry have made in favor of mergers. By harnessing economies of scale and scope, they’ve argued, larger organizations can offer better care at lower costs.

In one recent example, two Texas health systems — Baylor Scott & White, and Memorial Hermann Health System — sought to merge, forming a 68-hospital system. The systems have since abandoned the plan, but not before Jim Hinton, Baylor Scott & White’s chief executive, told The Wall Street Journal that “the end, the more important end, is to improve care.”

Yet Martin Gaynor, a Carnegie Mellon University economist who been an author of several reviews exploring the consequences of hospital consolidation, said that “evidence from three decades of hospital mergers does not support the claim that consolidation improves quality.” This is especially true when government constrains prices, as is the case for Medicare in the United States and Britain’s National Health Service.

“When prices are set by the government, hospitals don’t compete on price; they compete on quality,” Mr. Gaynor said. But this doesn’t happen in markets that are highly consolidated.

In 2006, the National Health Service introduced a policy that increased competition among hospitals. When recommending hospital care, it required general practitioners to provide patients with five options, as well as quality data for each. Because hospital payments are fixed by the government — whichever hospital a patient chooses gets the payment for care provided to that patient — hospitals ended up competing on quality.

Mr. Gaynor was an author of a study showing that consequences of this policy included shorter hospital stays and lower mortality. According to the study, for every decrease of 10 percentage points in hospital market concentration, 30-day mortality for heart attacks fell nearly 3 percent.

Another study found that hospital competition in the N.H.S. decreased heart attack mortality, and several studies of Medicare also found that hospital competition results in lower rates of mortality from heart attacks and pneumonia.

Another piece of evidence in the competition-quality connection comes from other types of health care providers, including doctors. Recently, investigators from the Federal Trade Commission examined what happens when cardiologists team up into larger groups. The study, published in Health Services Research, focused on the health care outcomes of about two million Medicare beneficiaries who had been treated for hypertension, for a cardiac ailment or for a heart attack from 2005 to 2012.

The study found that when cardiology markets are more concentrated, these kinds of patients are more likely to have heart attacks, visit the emergency department, be readmitted to the hospital or die. These effects of market concentration are large.

To illustrate, consider a cardiology market with five practices in which one becomes more dominant — going from just below a 40 percent market share to a 60 percent market share (with the rest of the market split equally across the other four practices). The study found that the chance of having a heart attack would go up 5 to 7 percent as the largest cardiology practice became more dominant. The chance of visiting the emergency department, being readmitted to the hospital or dying would go up similarly.

The study also found that greater market concentration led to higher spending. And a different study of family doctors in England found that quality and patient satisfaction increased with competition.

For many goods and services, Americans are comfortable with the idea that competition leads to lower prices and better quality. But we often think of health care as different — that it somehow shouldn’t be “market based.”

What the research shows, though, is that there are lots of ways markets can function, with more or less government involvement. Even when the government is highly involved, as is the case with the British National Health Service or American Medicare, competition is a valuable tool that can drive health care toward greater value.

 

 

DIGNITY HEALTH, CHI FINALIZE $29B COMMONSPIRIT HEALTH MEGAMERGER

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https://www.healthleadersmedia.com/strategy/dignity-health-chi-finalize-29b-commonspirit-health-megamerger

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CommonSpirit

The newly merged, $29 billion system will have a footprint in 21 states, with more than 700 care sites and 142 hospitals, and an extensive social services and population health network.

KEY TAKEAWAYS

CHI CEO Kevin E. Lofton and Dignity Health President and CEO Lloyd H. Dean ‘are each a CEO in the Office of the CEO’ for the new health system, which will be based in Chicago.

CommonSpirit Health pledges to focus on underserved communities, population health, and social determinants of health.

Dignity Health and Catholic Health Initiatives on Friday finalized the megamerger of the two Catholic health systems that will now be known as CommonSpirit Health.

The newly merged, $29 billion system will have a footprint in 21 states, with more than 700 care sites and 142 hospitals, along with research programs, virtual care services, home health programs, and population health initiatives to tackle the root causes of poor health.

CHI CEO Kevin E. Lofton and Dignity Health President and CEO Lloyd H. Dean are “each a CEO in the Office of the CEO” for the new health system, which will be based in Chicago.

“We didn’t combine our ministries to get bigger, we came together to provide better care for more people,” Dean said in a media release.

“We created CommonSpirit Health because in order to solve national health challenges, we need the breadth, scope, and resources to make a nationwide impact,” Dean said.

Lofton said CommonSpirit Health “will bring the expertise of a national health system to neighborhoods across the country.”

“Whether it’s a neurological institute in Arizona, a 25-bed critical access facility in North Dakota, a mobile lung cancer screening program in Tennessee, or a ‘hospital at home’ in Nebraska, CommonSpirit Health will expand the best approaches from across our new organization,” Lofton said. “Our whole will be much greater than the sum of our parts.”

The new health system has 150,000 employees and 25,000 physicians and advanced practice clinicians.

Dean noted that 27 million Americans remain uninsured, and life expectancy continues to fall, despite some progress made under the Affordable Care Act. He said CommonSpirit will focus on underserved populations and the social causes of poor health.

“Too many people still can’t access quality healthcare in their communities,” Dean says. “America’s healthcare system need big changes, and we have a big goal of improving the health of millions of people in this country.”

Lofton said CommonSpirit “will focus on treating the whole person, particularly the social causes of poor health that lead to needless suffering, unnecessary hospital visits, and premature deaths.”

“Our goal is to be the leader in every type of care, whether you need brain surgery, urgent care for the flu, or help managing your diabetes,” he said.

CHI and Dignity Health previously announced that the new ministry will retain the names of local facilities and services in the communities where they are located.

‘GAINING ECONOMIES OF SCALE’

Brad Haller, director in West Monroe Partners’ Mergers & Acquisitions practice, notes that “so far, the new entity has shown very little change to how they will actually deliver care.”

“While the organization has a name for the merged entity, CommonSpirit, both systems indicated they are going to continue operating under both the CHI and Dignity names in their local markets,” he says.

“The merger wasn’t about branding or changing the nature of its business, but rather gaining economies of scale and geographic footprint, which makes sense for the like-mindedness in the way they deliver care and manage operations,” he says.

Concerns had been raised during the merger talks that women’s healthcare services would be ill-affected under the consolidated health system. Haller says those concerns appear to have been addressed with California approved the merger with a stipulation that CommonSpirit “must maintain emergency services and women’s healthcare services for 10 years after the deal closes.

“(California) also required CommonSpirit to create a Homeless Health Initiative to support hospitalized homeless patients,” Haller says. “I would suspect that the newly merged organization will find more synergies in care delivery as time goes on, as most merged organizations find during the post-integration phase, but in the spirit of efficiency or expansion.”

“The merger wasn’t about branding or changing the nature of its business, but rather gaining economies of scale and geographic footprint, which makes sense for the like-mindedness in the way they deliver care and manage operations.”

—Brad Haller

Allan Baumgarten, a veteran observer of the hospital sector in Midwestern states, says several Dignity hospitals are considered “non-Catholic” and not subject to the Vatican guidelines, such as not performing tubal ligations.

“Those hospitals will be kept somewhat separate so they can continue to offer those services,” he says.

Baumgarten notes the odd choice of Chicago as a headquarters for CommonSpirit, “even though neither system has a presence there.”

“CHI has three small hospitals in Minnesota (Park Rapids, Breckenridge, LIttle Falls) and some nursing homes, but otherwise the combined system has only a small presence in the Midwest,” he says.

“Not sure what to say about the impact on care delivery,” Baumgarten says. “In theory, if one system has certain strengths, like better care management and discharge planning, thereby reducing the number of readmissions, it could share those strengths and practices with the other hospitals.”

“To gain efficiencies, you might see them agreeing on a single vendor for certain medical devices or commodity suppliers that all hospitals will have to use in the future,” he says. “In any of these mergers, health economists will tell you that most of the benefits could be achieved by contracts and strategic partnerships.”

CHI and Dignity announced their plans to merge in December 2017. The deal was expected to close at the end of 2018, but it was delayed for one month. No specific reason was given for the delay.

The name CommonSpirit Health was chosen in November from among more than 1,200 possible names. The health systems said they settled on that name because it represents a shared sense of missional service and because it resonates with the diverse populations being served, the organizations said.

“WE DIDN’T COMBINE OUR MINISTRIES TO GET BIGGER, WE CAME TOGETHER TO PROVIDE BETTER CARE FOR MORE PEOPLE.”

 

 

Pipeline Health buys 22 freestanding ERs

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https://www.beckershospitalreview.com/hospital-transactions-and-valuation/pipeline-health-buys-22-freestanding-ers.html?origin=cfoe&utm_source=cfoe

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Pipeline Health, a privately held hospital ownership and management company based in Los Angeles, has acquired Arlington-based Texas Health Resources’ majority stake in 22 freestanding emergency rooms, according to The Dallas Morning News.

Pipeline Health will jointly own the freestanding ERs, which are in the Dallas-Forth Worth area, with Lewisville, Texas-based Adeptus Health. Adeptus was acquired by a hedge fund in 2017 after filing for Chapter 11 bankruptcy.

The group of freestanding ERs will be renamed City Hospital Emergency Care, and they will become outpatient ERs of City Hospital at White Rock in Dallas, which Pipeline owns.

 

 

2 California hospitals face closure if sale delayed

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https://www.beckershospitalreview.com/finance/2-california-hospitals-face-closure-if-sale-delayed.html?origin=cfoe&utm_source=cfoe

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Santa Clara County (Calif.) officials criticized California Attorney General Xavier Becerra at a press conference Jan. 24 for trying to block the county’s purchase of two bankrupt hospitals, according to The Mercury News.

In December, the bankruptcy court approved Santa Clara County’s $235 million offer to buy O’Connor Hospital in San Jose and St. Louise Regional Hospital in Gilroy from El Segundo, Calif.-based Verity Health, which entered Chapter 11 bankruptcy in August. Mr. Becerra appealed the bankruptcy court’s approval of the sale earlier this month, putting the deal in jeopardy.

Mr. Becerra is seeking to halt the sale because Santa Clara County has not agreed to conditions put in place in 2015 when private hedge fund Blue Mountain Capital acquired six hospitals owned by Los Altos, Calif.-based Daughters of Charity Health System. The deal and name change to Verity were approved, subject to several conditions.

“In this case, we have the responsibility to ensure any transfer of the hospital maintains previously imposed conditions,” Mr. Becerra’s office said in an emailed statement to The Mercury News. “The conditions include the requirement to have an emergency room, inpatient facility beds, intensive care services, and NICU. The Attorney General is fighting to ensure these conditions are enforced.”

At the Jan. 24 press conference, Santa Clara County CEO Jeff Smith, MD, said Mr. Becerra cares more about maintaining “power and control” over regulations than local residents’ access to public hospitals, according to the report.

A bankruptcy court hearing on Mr. Becerra’s request to halt the sale of the hospitals is set for Jan. 30. Dr. Smith said the outcome of the hearing could determine whether the hospitals shut down.

“If that stay is granted, that will delay the process … and it is highly likely those hospitals will close,” he said, according to The Mercury News.

O’Connor Hospital and St. Louise Regional Hospital are two of the six hospitals Verity operated when it filed for bankruptcy protection. On Jan. 18, Verity announced it had received a $610 million offer for the other four hospitals.

 

 

Healthcare M&A now more about strategy than opportunity, Kaufman Hall says

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https://www.healthcaredive.com/news/healthcare-ma-now-more-about-strategy-than-opportunity-kaufman-hall-says/545909/

Dive Brief:

  • The size of the companies involved in healthcare M&A continues to grow. The average size in revenue of sellers was $409 million last year, nearly 14% higher than a decade ago, Kaufman Hall said in a new report.
  • Kaufman Hall found that seven transactions in 2018 involved sellers with net revenues of at least $1 billion.
  • Healthcare M&A today is more of a strategic decision than one about opportunistic growth. Fewer deals last year involved financially distressed sellers, according to the report.

Dive Insight:

Healthcare M&A isn’t so much about saving a struggling hospital now. Instead, these deals often involve strong health systems looking to expand into new areas.

Nearly one-third of healthcare transactions last year involved companies with revenues of between $100 million and $500 million. About one-fifth of deals were at least $500 million.

Nearly half involved not-for-profit companies acquiring other nonprofits and about one-quarter were not-for-profits buying for-profits. Another nearly 25% involved a for-profit acquiring either another for-profit or nonprofit.

Kaufman Hall said M&A activity isn’t about taking advantage of a struggling competitor. A mere 20% of deals involved a distressed company. Instead, health systems want strategic advantages.

“Health system leaders are seeking to acquire organizations that bring embedded expertise and resources to the deal, making these transactions more of a strategic partnership than an asset acquisition,” according to the report.

Kaufman Hall said it has found that health systems with “strong operational or clinical capabilities” are looking beyond their local markets.

New competitors in the market are offering larger scale and resources, including annual revenues as much as nearly 10 times the levels of the biggest not-for-profit systems. The CVS Health-Aetna deal kicked off a trend that continued with Humana-Kindred Healthcare and Optum-DaVita Medical Group and goes on with Amazon’s efforts to enter healthcare.

“New combinations across healthcare verticals and new market entrants are creating competitors that dwarf the scale of even the largest health systems,” according to the analysis. “The forces that are reshaping the industry affect not-for-profit and for-profit health systems alike and are causing not-for-profit and for-profit strategies to converge.”

Kaufman Hall found that consolidation is happening faster in some states than others. Not surprisingly, Texas led with eight deals in 2018. Florida (seven), Pennsylvania (six) and Louisiana and Tennessee (five each) ranked next.

Texas ($6.8 billion) and Florida ($3.6 billion) led in terms of revenue of announced deals. Kaufman Hall said 16 states didn’t have any healthcare transactions. However, some of those states, such as Kentucky and Massachusetts, have seen a high volume or large deals in recent years.

One downside of M&A is consolidation that can limit competition. The Center for American Progress recently reported that provider consolidation has led to higher healthcare prices. That report also found that consolidation isn’t lowering costs and improving care coordination, which is a common argument in favor of M&A activity.

 

 

 

 

Hahnemann University Hospital, St. Christopher’s to share newly-appointed CEO

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Hahnemann, St. Christopher’s were recently sold by Tenet Healthcare to American Academic Health System, a newly-formed affiliate of Paladin Health.

The California healthcare firm that owns both Hahnemann University Hospital and St. Christopher’s Hospital for Children has combined leadership of the two well-known Philadelphia institutions under one new chief executive.

Paladin Healthcare created a new affiliate, American Academic Health System, to own and operate Hahnemann and St. Christopher’s. A memo sent to staff this week said that Southern California hospital executive Suzanne Richards took over as CEO for both hospitals Monday,  according to the Philadelphia Inquirer.

Neither of the previous CEOs, Hahnemann interim CEO Anthony Rajkumar or St. Christopher’s leader George Rizzuto, were mentioned in the memo, the report said.

THE IMPACT

Hahnemann University Hospital is a 496-bed academic medical center affiliated with Drexel University School of Medicine. St. Christopher’s staffs more than 220 pediatric experts and offers both general pediatric care and pediatric specialties including cardiology, ear, nose and throat, gastroenterology, oncology and orthopedics, as well as one of only three Level I pediatric trauma centers in Pennsylvania and the only pediatric burn center in the Philadelphia area.

The hospital also touts an expansive primary and specialty care network that reaches into the Philadelphia suburbs and New Jersey.

THE TREND

The Inquirer report said this is one in a line of management changes American Academic has made since it acquired Hahnemann and St. Christopher’s from Tenet Healthcare in September.

In August, St. Christopher’s laid off 45 people in its physician practices and eliminated an unspecified number of positions also in its physician practices, which amounted to roughly 7 percent of the workforce in the hospital’s practices. Quoting a hospital spokesperson, the report said those being laid off were given severance or offered positions at other American Academic Health System facilities.

Paladin Healthcare formed AAHS to own and operate academic medical centers and general acute care hospitals across the country. Paladin currently manages four Southern California general acute care hospitals as well as the 145-year-old teaching hospital Howard University Hospital in Washington, DC.

Tenet netted roughly $170 million from the sale of Hahnemann and St. Christopher’s, comprised of $152.5 million in cash at closing and a promissory note in the amount of $17.5 million.

ON THE RECORD

At the time of publishing, requests for comment made to Hahnemann, St. Christopher’s and American Academic Health on the change in leadership had not been returned.

On the sale of Hahnemann and St Christopher’s to Paladin/American Academic: “Our leadership team has extensive, first-hand experience in operating hospitals in the Philadelphia market and understands the vital role Hahnemann and St. Christopher’s play in the Philadelphia healthcare delivery system,” said Barry Wolfman, president of Paladin Healthcare. “We appreciate Drexel University College of Medicine’s support and look forward to working closely with the entire physician community to continue the longstanding clinical and academic excellence of both hospitals.”

 

 

Report: There were fewer, but larger, hospital mergers and acquisitions in 2018

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https://www.fiercehealthcare.com/hospitals-health-systems/report-what-to-expect-healthcare-m-a-2019?mkt_tok=eyJpIjoiTkROak5UWXpOR1ZtT0RNeiIsInQiOiJBbmtrSGp0c0ZtU1hwNzRlOGNveVdHQ3JyenpWRE1FeXdVVjVYYzN0WFwvV1Vyb1ZkQWpVNHNMM29kOGw1bXRMVDA0bTNuUm1lQ1RVb0NzYVFGa0NWdGVRVk5pOGw3amFtbEI1YlpEdTdTTkYxbkFWSGlDT2lMMCtIZktpN0ZkYlcifQ%3D%3D&mrkid=959610&utm_medium=nl&utm_source=internal

Handshake business deal executives

The number of hospital mergers last year dipped about 22% in 2018 but grew in overall size as part of a broader trend toward megamergers, according to a new report.

In all, hospitals announced a total of 90 transactions in 2018, down from 115 in 2017, according to a report (PDF) from Kaufman Hall. The firm began monitoring hospital M&A in 2000. About 20% of the acquisition deals were considered distressed transactions.

The value of those deals is increasing, with the average size of a seller by revenue has grown at a CAGR of almost 14% per year since 2008 and reached a new high of $409 million in 2018.

“That so many of 2018’s mega-mergers involve the combination of systems from different—though often contiguous—geographies signals the desire of health system leaders to expand their organizations into new markets, or to bring in a partner from an outside market,” Kaufman Hall said in the report. “For health system leaders looking for an acquisition partner from outside of their organization’s home market, considerations may include the desire to improve operations within the home market, or a need for additional capital to better compete within the home market.”

Texas led the nation for M&A last year, clocking eight hospital deals with a total value of deals estimated to be about $6.8 billion. Most notably, the report points to Baylor, Scott & White’s planned merger with Memorial Hermann will bring together two Texas-based systems and combine Dallas/Fort Worth and central Texas markets with the Houston market.

Florida had seven announced deals worth about $3.6 billion, and Pennsylvania had six deals worth about $2.2 billion.

Kaufman Hall also cited the “slow but steady movement toward population health” as a factor in the desire to increase market presence and penetration.

“Effective risk management depends on a health system’s ability to improve cost efficiencies, care efficacy, and care management across the continuum, which may require both horizontal and vertical integration to achieve,” they said.

Kaufman Hall said as new combinations and competitors appear in the healthcare market, hospitals and health systems should double down on their consumer strategy and the fight to control healthcare’s “front door.”

They should also seek opportunities to deepen growth across the spectrum of healthcare services through combinations or partnerships with other healthcare organizations.

 

 

 

 

Top 12 takeaways from the 2018 JP Morgan Healthcare Conference — while the destination is uncertain, the direction is clear

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https://www.beckershospitalreview.com/hospital-management-administration/12-things-you-need-to-know-from-the-2018-jp-morgan-healthcare-conference-while-the-destination-is-uncertain-the-direction-is-clear.html

The recent breathtaking flurry of mega-mergers coupled with increasingly challenging market forces and an ever shifting political landscape has cast a cloud of confusion regarding where the U.S. healthcare delivery system is heading.  

So, where do you go to find the map?

Every year, the JP Morgan Healthcare Conference provides an incredibly efficient snapshot of the strategies for large healthcare delivery systems, the hub for healthcare in the U.S. Most of these organizations are also the largest employers in their respective states. The conference took place this week in San Francisco with over 20 healthcare systems presenting, including Advocate Health Care, Aurora Health Care, Baylor Scott & White Health, Catholic Health Initiatives, Geisinger Health System, Hospital for Special Surgery, Intermountain Healthcare, Mercy Health in Ohio, Northwell Health, Northwestern Medicine, Partners HealthCare System, WakeMed Health & Hospitals and many of the other big name brands in the market. Each provided their strategic roadmap in a series of 25-minute presentations from their “C” suite. If you’re looking for the GPS on strategy and a gauge on the health of healthcare, this is it.  

How do their strategies differ? What direction are they heading in? There is a great line from Alice in Wonderland that goes, “If you don’t know where you’re going, any road will take you there.” You would think that line applies perfectly to the U.S healthcare system, but the good news is it actually doesn’t.

While the exact destination for everyone is TBD, the direction they are heading in is actually pretty clear and consistent. It turns out that they are all using a very similar compass, which is sending them down a similar path.

So, what are the roadside stops health systems consider absolutely necessary to be part of their journey to creating a more viable and sustainable value-based business model?

Based on the travel plans for over 20 of the largest and most prestigious healthcare delivery systems in the country, here’s your GPS and list of 12 things you “must do” on your journey.

1. You Must Scale

Clearly the headline at #JPM18 was the flurry of major announcements regarding major mergers. With that said, two of the mergers were front and center: teams were there to present from Downers Grove, Ill.-based Advocate and Milwaukee-based Aurora, which will be a $10 billion organization with 70,000 employees, as well as San Francisco-based Dignity Health and Englewood, Colo.-based Catholic Health Initiatives, which will be a $28 billion organization with 160,000 employees. The size and scale of these mergers is pretty stunning. While the announcement of these and the other recent mega-mergers has forced many into their board room to determine what the deals mean to them, the consensus at the conference was this: There are a number of different paths forward to achieve scale. Some, like Baylor Scott & White in Texas, have aggressive regional expansion plans. Others are betting on partnerships to provide the same or even more value. Taking a pulse of the room, two things were clear. The first is there is no definition of scale any more in this market. The second is that, despite this flurry of mergers, “getting really big” is not the only destination.  

2. You Must Pursue “Smart Growth” and Find New Revenue Streams

Running counter to the merger narrative in the market, Salt Lake City-based Intermountain provided a good overview of the movement to what is called an “asset light” strategy of “smart growth.” This is a radically contrarian approach to the industry norm, which is the capital intensive bricks and mortar playbook of buying and building. As part of their strategy, Intermountain will open a “virtual hospital” delivering provider consultations and remote patient monitoring via telehealth. The system will also launch a number of healthcare companies every year, leveraging their considerable resources in a manner they believe will produce a higher yield. Other health systems outlined a similar stream of initiatives they have in motion to diversify their revenue streams and expand their business model into higher margin, higher growth businesses. One example is Cincinnati-based Mercy Health, which achieved strong growth and leverage via their investment in a revenue cycle management company. Advocate in Illinois formed a partnership with Walgreens. Together, they now operating 56 retail clinics and Advocate has seen a significant impact on driving new patients and downstream revenue to their system. The bottom line is all now recognize that they must think and act differently to be able to continue to fund their clinical mission and serve their community.

3. You Must Measure and Manage Cost and Margins

While some are moving aggressively to get scale, everyone is looking to more effectively use the resources they have and get more operating leverage. Margin compression was a consistent theme, with many systems now moving into consistent, stable operating models around managing margins versus launching reactionary initiatives when they find a budget gap. What is emerging is a new discipline and continuous process around managing cost and margins that is starting to look similar to the level of sophistication we have seen in the past for revenue cycle management. To that end, there has been major movement in the market to implement advanced cost accounting systems, often referred to as financial decision support, which provide accurate and actionable information on cost and help organizations understand their true margins as they take on risk-based, capitated contracts. Some during the conference referred to it as the “killer app” for the financial side of driving value. Regardless of what you call it, all are moving aggressively to understand the denominator of their value equation.

4. You Must Become a Brand

Investing in and better leveraging their brand has become a strategic must for health systems. The level of sophistication is growing here as providers shift their mental model to viewing patients as “consumers.” Aurora in Wisconsin cited their dedicated Consumer Insights Group and outlined their “best people, best brand, best value” approach that has been incredibly effective both internally and externally. At the same time, the bigger investments for many health systems relative to brand are more on brand experience than brand image, with a focus on understanding and radically rethinking the consumer experience. As an example, at Danville, Pa.-based Geisinger, close to 50 percent of ambulatory appointments are scheduled and seen on the same day. And every health system is making meaningful investments in their “digital handshake” with consumers, creating and leveraging it via telehealth as well as mobile applications to enhance the customer experience.

5. You Must Operate as a System, Not Just Call Yourself One

One clear theme at #JPM18 is different organizations were at different points along the continuum of truly operating as a system vs. merely sharing a name and a logo. There are a number of reasons for this, but you are increasingly seeing tough decisions actually being made vs. just kicking the can down the road. There has been a great deal of acquisitions over the last few years coupled with a new wave of thinking relative to integration that is more aggressive and more forward-looking. This mental shift is actually a very big deal and perhaps the most important new trend. Many health systems are heavily investing in leadership development deep into their organization to drive changes much faster.   

6. You Must Act Small

The word “agile” is quickly becoming part of everyone’s narrative with health systems looking to adopt the principles and processes leveraged in high tech. Chicago-based Northwestern Medicine is an example of an organization that has grown dramatically in the last five years, now approaching $5 billion in revenue. At the same time, they have still found a way to operate small, leveraging daily huddles across the organization to drive their results. The team at Raleigh, N.C.-based WakeMed has achieved a dramatic financial turnaround over the last few years, applying a similar level of rigor yielding major operational improvements in surgical, pharmacy and emergency services that have translated into better bottom line results.

7. You Must Engage Your Physicians

Employee engagement was a major theme in many of the presentations. With the level of change required both now and in the future, a true focus on culture is now clearly top of mind and a strategic must for high-performing health systems. That said, only a handful articulated a focus on monitoring and measuring physician engagement. This appears to be a major miss, given that physicians make roughly 80 percent of the decisions on care that take place and, therefore, control 80 percent of the spend. One data point that stood out was a 117 percent improvement in physician engagement at Northwestern. Major improvements will require clinical leadership and a true partnership with physicians.

8. You Must Leverage Analytics

Many have reached their initial destination of deploying a single clinical record, only to find that their journey isn’t over. While health systems have made major investments big data, machine learning and artificial intelligence, there was a consistent theme regarding the need to bring clinical and financial data together to truly understand value. Part of this path is the consolidation of systems that is now needed on the financial side of the house with a focus on deploying a single platform for financial planning, analytics and performance. The primary focus is to translate analytics not just into insights, but action.

9. You Must Protect Yourself

As organizations move deeper into data, there is increased recognition that cybersecurity is a major risk. Over 40 percent of all data breaches that occur happen in healthcare. During the keynote, JP Morgan Chase CEO Jamie Dimon shared that his organization will spend $700 million protecting itself and their customers this year. Investments in cybersecurity will continue to ramp up due to both the operational and reputational risk involved. Cybersecurity has become a board room issue and a top-of-mind initiative for executive teams at every health delivery system.

10. You Must Manage Social Determinants of Health in the Communities You Serve

Perhaps the most encouraging theme for healthcare provider organizations was the need to engage the community they serve and focus on social determinants of health. As Intermountain shared: “Zip code is more important than genetic code.” To that end, Geisinger refers to their focus on “ZNA.” They have deployed community health assistants, non-licensed workers who work on social determinants of health and have implemented a “Fresh Food Farmacy,” yielding a 20 percent decrease in hemoglobin A1c levels along with a 78 percent decrease in cost. Organizations like ProMedica Health System in Ohio have seen similar results with their focus on hunger in Toledo. WakeMed has an initiative focused on vulnerable populations in underserved communities that has resulted in a significant decrease in ER visits and admissions and over $6 million in savings.

11. You Must Help Solve the Opioid Epidemic

The opioid issue is one that healthcare professionals take very personally and feel responsible for solving. It came up in virtually in every presentation, and it’s an emotional issue for the leaders of each organization. This is good news, but the better news is that they are taking action. As an example, Geisinger invested in a CleanState Medicaid member pilot that resulted in a 23 percent decrease in ER visits and 35 percent decrease in medical spending, breaking even on their investment in less than 10 months. While many would rightly argue that the economic rationalization isn’t needed for something this important, the fact that it’s there should eliminate any excuse for anyone not taking action.

12. You Must Deliver Value

The Hospital for Special Surgery in New York is the largest orthopedics shop in the U.S. and a great example of how value-based care delivery is taking shape. Perhaps the most revealing stat they shared is that 36 percent of the time patients receive a non-surgical recommendation when they are referred to one of their providers for a second opinion. This is exactly the type of value-based counseling and decision-making that will help flip the model of healthcare. Some systems are farther along than others. Northwestern currently has 25 percent of its patients in value-based agreements, but other systems have less. As the team from Intermountain re-stated to this audience this year, “You can’t time the market on value, you should always do the right thing, right now.” Well said.