Tag Archives: M&A

Viewpoint: Small hospitals should be hopeful and wary of national health systems

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With Cleveland Clinic eyeing acquisitions at two locations on Florida’s Treasure Coast — Indian River Medical Center in Vero Beach and Martin Health System in Stuart — residents and hospital workers should be wary but hopeful, according to the local TC Palm.

That a national power in the healthcare industry wants to snap up two independent nonprofit hospitals in Florida is no surprise. The area’s patient population has the trifecta of demographics: aging, wealthy and insured, TC Palm‘s Gil Smart wrote. In an era of increasing expenses, declining reimbursements and growing powers, finding a partner system can give small hospitals more weight in negotiations and help fund capital for investments in growth and change.

Yet as examples have shown, allowing bigger players to come into local markets means change, and not all of it is good, Mr. Smart noted. Unions will have it tougher at the negotiation table and control will change hands.

“Bottom line: There will be a loss of local control. There always is, where the bigger, faraway healthcare system gulps down the local guy,” Mr. Smart wrote. “Yet we shouldn’t let the drawbacks overshadow the potential benefits of having a globally renowned healthcare ‘brand’ set up shop in our backyards.”

The benefits, such as easier, better and more coordinated care, are a lot to be hopeful for. Read the full column here.

https://www.tcpalm.com/story/opinion/editorials/2018/06/04/cleveland-clinic-mean-better-health-care-here/668585002/

 

 

 

Top Three Trends in Mergers, Acquisitions, and Partnerships

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Learn how MAP activity is reshaping the healthcare landscape with these three key findings.

Mergers, acquisitions, and partnerships (MAP) show no sign of slowing down, and their momentum is expected to increase in the coming years, according to the HealthLeaders Media report Mergers, Acquisitions, and Partnerships: Examining Financial and Operational Impacts. MAP activity is “driven by the move to value-based care and provider needs for greater scale and geographic coverage,” says Jonathan Bees, senior research analyst at HealthLeaders Media.

The report also includes findings from a HealthLeaders Media survey, which polled 190 senior executives on recent and future MAP activity. The majority of respondents (71%) say their organizations plan to increase MAP activity in the next three years, with 68% exploring potential deals and completing deals underway over the next 12–18 months.

Here are three key findings from the latest wave of MAP activity.

1. MAPs lead to positive clinical and financial results

When healthcare organizations commit to a MAP activity, they are equally focused on meeting financial and care delivery objectives. Organizations cite a variety of financial reasons for pursuing MAP planning or activity, including to improve financial stability (63%), to improve operational cost efficiencies (61%), to increase market share in their geographical area (60%), and to improve position for payer negotiations (59%).

The results show that larger organizations are more interested in expanding geographic reach compared to smaller entities, which are more focused on meeting financial goals. Respondents say their top care delivery objectives include improving their position for care delivery efficiencies (65%), improving clinical integration (55%), and improving their position for population health management (54%).

Respondents are generally positive about MAP financial and clinical results. Nearly half (46%) say their net patient revenue increased following a recent MAP activity, while 28% report it remained the same. Only 6% experienced a decrease. Moreover, 73% of respondents expect the cumulative total dollar value of their organization’s MAP activity to increase within the next three years. Clinical markers are up as well, with 35% reporting quality outcomes increased after a MAP activity and 40% saying they remained the same. Patient readmission results were mixed. Forty percent mention they stayed the same, while 18% saw a decrease, and 11% experienced an increase.

2. New partnership deals are emerging

The majority of recent MAP activities don’t fall under a merger or acquisition category, technically. Twenty-nine percent of survey respondents report their most recent MAP activity was a contractual relationship that wasn’t an M&A. “The use of non-M&A partnerships is expected to grow because this type of agreement is typically less expensive than traditional M&A and usually doesn’t require an exchange of assets or a change of local governance,” according to the  report.

In the broader healthcare environment, transformative developments are also taking place, says Brent McDonald, head of Healthcare Strategic Advisory Services, managing director at Bank of America Merrill Lynch. “The U.S. healthcare landscape is certainly undergoing changes that are beyond the more traditional horizontal (hospital-to-hospital) mergers,” he says, pointing to Amazon’s announcement that it will enter the healthcare space, United/Optum’s acquisition of DaVita Medical Group, and the contemplated merger between CVS and Aetna.

3. Why most deals fall apart

As a MAP comes together, the due diligence period begins, and so does the potential for derailment. Financial liabilities and cultural issues are the leading causes for shutting down a MAP deal. The top three financial reasons MAPs are abandoned before or during due diligence are concerns about assumption of liabilities (21%), costs to support the transaction were too high (19%), and concerns about price (19%).

The operational reasons for backing out of a MAP include incompatible cultures (30%), concerns about governance (24%), and concerns about the operational transition plan (21%). Cultural clashes can occur at every level of the organization. “Oftentimes, you have cultural compatibility at the senior level (those who are consummating the deal), but find that culture throughout the remaining levels of the organization is not as conducive to a merger,” says Pamela Stoyanoff, MBA, CPA, FACHE, executive vice president, chief operating officer at Dallas-based Methodist Health System, and lead advisor for the HealthLeaders Media MAP survey. “That is something you don’t necessarily see until later, after the deal is done.”

Don’t lose sight of your key stakeholders

In this period of heightened MAP activity and an uncertain future, it’s important that healthcare organizations focus on building sustainable consumer-centered care models. It is critical to set strategic goals that strengthen an organization’s relevance with and attractiveness to employers and payers, as well as increase patient convenience and connectivity, says McDonald. “It would be prudent to keep a keen focus on positioning health systems with their key stakeholders in mind and on becoming/continuing as the healthcare delivery network of choice and a ‘must have.’ ”

 

 

The health care industry is being transformed, one deal at a time

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The health care industry is being transformed, one deal at a time

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More than 200 health care deals representing $72.6 billion were announced in the first quarter of 2018, kicking off what will be an active year for deal making in the U.S. Consolidation plans, pent up private equity demand, new entrants, and other market forces will continue to motivate industry players to reflect, reevaluate their business models, and make strategic bets on deals and partnerships.

New business models are emerging. Their common goal is to drive down costs, create value, and compete more effectively. These deals position major players to transition to a system based on value of care versus the volume of services — a system that better aligns with what consumers have come to expect from their health care experience.

Four archetypes of new health care deals are emerging. As I described in a recent PwC Health Research Institute report, they include:

  • Vertical integrators such as Cigna and Express Scripts, which hope to build efficiencies of scale and condense the value chain
  • Employer activists such as Amazon, Berkshire Hathaway, and JPMorgan Chase, who seek a better health care offering for their employees
  • Technology invaders such as Google or Uber aiming to gain better footholds in the industry
  • Health retailers such as Amazon looking to gain market share by better understanding consumer desires and behavior and provide some types of health care directly

If these new models gain steam, disruption will follow.

An arduous journey

Current health care deals have to close in one of the most complex and regulated markets in the world. Before these companies can actually effect change, they will have to create entirely new infrastructures, drive behavior change, and bring on the right leaders to help them navigate twists and turns for years. New entrants — many from fast-paced industries that have long put data analytics and the customer experience at the center of their businesses — will have to endure a grueling pace on the path to change.

The health care industry will transform, but we will likely see more plans on the shelf than in the market. Changes will be slow, but several trends will be more visible this year:

The landscape will keep changing. Announcements of more deals will put pressure on other companies to secure their own acquisitions. Activity begets more activity, and consolidation prompts other companies to acquire — and then likely divest — as they reshape their business. And it’s no secret that private equity has a surplus of cash and its eyes on health care.

Companies will learn to compete differently. As large organizations continue to merge — and they will — small organizations will reposition themselves as more nimble, customer-centric options. They will leverage their size to invest more into building relationships with consumers, winning loyalty points from them along the way.

The customer experience will evolve and drive deals. There is little question among most experts and patients that significant improvements to health services’ customer experience are needed. Health care as an industry has the lowest Net Promoter Score, a tool used to gauge the loyalty of a firm’s customer relationships, of any industry: Health care’s score is 15, compared with tech’s impressive 60. Many companies are looking at ways to use data and technology to improve patients’ experiences.

New models must foster new cultures. For all the reasons it is difficult to enter the health services market, it is even more difficult to create real change that affects the sector’s most important stakeholder: consumers. As companies continue to find ways to deliver more values-based care through acquisition and partnerships, they will also have to explore ways to drive a culture shift. Taking care of doctors so they can spend more time with patients and less time with paperwork and electronic health records, and empowering consumers with the right tools and information to actively participate in their own care, all have distinct roles in the future health economy.

The health services industry can expect to see steady deal making in what will prove to be an exciting time. But amidst all the excitement, we will need to remain cautiously optimistic that this increased consolidation will create value, as the system is incredibly nuanced and slow to change. New entrants will need to have endurance and commitment to succeed.

 

 

Beth Israel Deaconess Medical Center will file certificate of need on new $534 million inpatient building

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Credit: Beth Israel Deaconess Medical Center

 

The new building, which will house 345,000 square feet of space, is their first new building in 20 years, the system says.

Beth Israel Deaconess Medical Center will spend $534 million to build a new inpatient tower at their Longwood Medical Center Campus, the system announced.

The new 10-story, 345,000 square foot building will be BIDMC’s first in 20 years and will be located on their West Campus.

It will house single-bedd, family-friendly patient rooms, including up to 128 medical-surgical patient rooms, some of which will replace double-bedded rooms elsewhere on BIDMC’s West Campus. It will also hold 30 intensive care unit rooms ideal for privacy and complex medical care.

Large surgical suites and diagnostic and procedural suites to handle acute care patients as well as a medical helicopter landing pad to support the level 1 trauma center will also be part of the new building.

To benefit patients, caregivers and families and continue environmental stewardship efforts, an accessible rooftop green space and healing garden will be available as well.

The announcement that the system will file a certificate of need this month comes as BIDMC’s parent company CareGroup moves ahead with a major merger that will yield a new system that also includes Lahey Health facilities and a stand-alone hospital in Newburyport. The system would be the second largest in the region following Partners Healthcare.

Last month, the Massachusetts Department of Health officially greenlighted the proposed merger, with the Public Health Council voting unanimously in favor of the deal. The Health Policy Commission and leaders in the proposed new system are working on a cost and market impact report, which would gauge the impact of the merger. That report is expected in mid-June.

 

California Hospital Giant Sutter Health Faces Heavy Backlash On Prices

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The state’s top cop is suing Sutter, accusing one of the nation’s biggest health systems of systematically overcharging patients and illegally driving out competition.

Cooking dinner one night in March, Mark Frizzell sliced his pinkie finger while peeling a butternut squash and couldn’t stop the bleeding.

The 51-year-old businessman headed to the emergency room at Sutter Health’s California Pacific Medical Center in San Francisco. Sutter charged $1,555 for the 10 minutes it treated him, including $55 for a gel bandage and $487 for a tetanus shot.

“It was ridiculous,” he said. “Health insurance costs are through the roof because of things like this.”

California Attorney General Xavier Becerra couldn’t agree more. The state’s top cop is suing Sutter, accusing one of the nation’s biggest health systems of systematically overcharging patients and illegally driving out competition in Northern California.

For years, economists and researchers have warned of the dangers posed by large health systems across the country that are gobbling up hospitals, surgery centers and physicians’ offices — enabling them to limit competition and hike prices.

Becerra’s suit amounts to a giant test case with the potential for national repercussions. If California prevails and is able to tame prices at Northern California’s most powerful, dominant health system, regulators and politicians in other states are likely to follow.

“A major court ruling in California could be a deterrent to other hospital systems,” said Ge Bai, an assistant professor at Johns Hopkins University who has researched hospital prices nationwide. “We’re getting to a tipping point where the nation cannot afford these out-of-control prices.”

Reflecting that sense of public desperation, Sutter faces two other major suits — from employers and consumers — which are wending their way through the courts, both alleging anticompetitive conduct and inflated pricing. Meanwhile, California lawmakers are considering a bill that would ban some contracting practices used by large health systems to corner markets.

Sutter, a nonprofit chain, is pushing back hard, denying anticompetitive behavior and accusing Becerra in court papers of a “sweeping and unprecedented effort to intrude into private contracting.” Recognizing the broader implications of the suit, both the American Hospital Association and its California counterpart asked to file amicus briefs in support of Sutter.

In his 49-page complaint, Becerra cited a recent study finding that, on average, an inpatient procedure in Northern California costs 70 percent more than one in Southern California. He said there was no justification for that difference and stopped just short of dropping an expletive to make his point.

“This is a big ‘F’ deal,” Becerra declared at his March 30 news conference to unveil the lawsuit. In an interview last week, he said, “We don’t believe it’s fair to allow consolidation to end up artificially driving up prices. … This anticompetitive behavior is not only bad for consumers, it’s bad for the state and for businesses.”

To lessen Sutter’s market power, the state’s lawsuit seeks to force Sutter to negotiate reimbursements separately for each of its hospitals — precluding an “all or nothing” approach — and to bar Sutter employees from sharing the details of those negotiations across its facilities. Becerra said Sutter has required insurers and employers to contract with its facilities systemwide or face “excessively high out-of-network rates.”

Heft In The Marketplace

Overall, Sutter has 24 hospitals, 36 surgery centers and more than 5,500 physicians in its network. The system boasts more than $12 billion in annual revenue and posted net income of $958 million last year.

The company’s heft in the marketplace is one reason why Northern California is the most expensive place in the country to have a baby, according to a 2016 report. A cesarean delivery in Sacramento, where Sutter is based, cost $27,067, nearly double what it costs in Los Angeles and New York City.

For years, doctors and consumers have also accused Sutter of cutting hospital beds and critical services in rural communities to maximize revenue. “Patients are the ones getting hurt,” said Dr. Greg Duncan, an orthopedic surgeon and former board member at Sutter Coast Hospital in Crescent City, Calif.

Sutter says patients across Northern California have plenty of providers to choose from and that it has held its average rate increases to health plans to less than 3 percent annually since 2012. It also says it does not require all facilities to be included in every contract — that insurers have excluded parts of its system from their networks.

As for emergency room patients like Frizzell, Sutter says its charges reflect the cost of maintaining services round-the-clock and that for some patients urgent-care centers are a less costly option.

“The California Attorney General’s lawsuit gets the facts wrong,” Sutter said in a statement. “Our integrated network of high-quality doctors and care centers aims to provide better, more efficient care — and has proven to help lower costs.”

Regulators in other states also have sought to block deals they view as potentially harmful.

In North Carolina, for instance, the state’s attorney general and treasurer both expressed concerns about a proposed merger between the University of North Carolina Health Care system and Charlotte-based Atrium Health. The two dropped their bid in March. The combined system would have had roughly $14 billion in revenue and more than 50 hospitals.

Last year, in Illinois, state and federal officials persuaded a judge to block the merger between Advocate Health Care and NorthShore University HealthSystem. The Federal Trade Commission said the new entity would have had 60 percent market share in Chicago’s northern suburbs. Still, Advocate won approval for a new deal with Wisconsin’s Aurora Health Care last month, creating a system with $11 billion in annual revenue.

Antitrust experts say states can deliver a meaningful counterpunch to health care monopolies, but they warn that these cases aren’t easy to win and it could be too little, too late in some markets.

“How do you unscramble the egg?” said Zack Cooper, an assistant professor of economics and health policy at Yale University. “There aren’t a lot of great solutions.”

A Seven-Year Investigation

California authorities took their time sounding the alarm over Sutter — a fact Sutter is now using against the state in court.

The state attorney general’s office, under the leadership of Democrat Kamala Harris, now a U.S. senator, started investigating Sutter seven years ago with a 2011 subpoena, court documents show. Sutter said the investigation appeared to go dormant in March 2015, just as Harris began ramping up her Senate campaign.

Becerra, a Democrat and former member of Congress, was appointed to replace Harris last year, took over the investigation and sued Sutter on March 29. His aggressive action comes as he prepares for a June 5 primary against three opponents.

Sutter faces a separate class-action suit in San Francisco state court, spearheaded by a health plan covering unionized grocery workers and representing more than 2,000 employer-funded health plans. The plaintiffs are seeking to recoup $700 million for alleged overcharges plus damages of $1.4 billion if Sutter is found liable for antitrust violations. Sutter also has been sued in federal court by five consumers who blame the health system for inflating their insurance premiums and copays. The plaintiffs are seeking class-action status.

San Francisco County Superior Court Judge Curtis E.A. Karnow granted Becerra’s request to consolidate his case with the grocery workers’ suit, which is slated for trial in June 2019.

The judge sanctioned Sutter in November after finding that Sutter was “grossly reckless” in intentionally destroying 192 boxes of evidence that were relevant to antitrust issues. As a result, Karnow said, he will consider issuing jury instructions that are adverse to Sutter.

In a note to employees, Sutter chief executive Sarah Krevans said she deeply regretted the situation but “mistakes do happen.”

In an April 27 court filing, Sutter’s lawyers criticized the state for piggybacking onto the grocery workers’ case. “The government sat on its hands for seven years, exposing the public to the alleged anticompetitive conduct. … Rather than driving the agenda, the Attorney General seeks to ride coattails.”

Outside court, California legislators are taking aim at “all or nothing” contracting terms used by Sutter and other hospital chains. The proposed law stalled last year amid opposition from the hospital industry. But consumer and labor groups are seeking to revive it this year.

In the meantime, Frizzell said he will probably wind up at one of Sutter’s hospitals again despite his disgust over his ER bill. “Most of the hospitals here are Sutter,” he said. “It’s difficult to avoid them.”

When M&As Go Wrong

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Considering a merger? Make sure the prospective partner’s financial liabilities and operational challenges are apparent by the time the due diligence phase is completed.

When providers identify a potential M&A candidate and perform due diligence, there are no guarantees that a formal agreement will be concluded. In fact, there are a number of financial and operational ways that a potential deal can be derailed.

According to the 2018 HealthLeaders Media Mergers, Acquisitions, and Partnerships Survey, respondents report that the top three financial reasons an M&A involving their organization was abandoned before or during the due diligence phase are concerns about assumption of liabilities (21%), costs to support the transaction were too high (19%), and concerns about price (19%).

Note that the full extent of a prospective organization’s financial liabilities may not be apparent until the due diligence phase is completed, which may explain why this aspect plays a major role as a deal breaker.

Operational challenges

Respondents say that the top three operational reasons that an M&A involving their organization was abandoned before or during the due diligence phase are incompatible cultures (30%), concerns about governance (24%), and concerns about the operational transition plan (21%).

Interestingly, based on net patient revenue, a greater share of large organizations (47%) than small (25%) and medium (17%) organizations mention incompatible cultures, an indication of some of the challenges providers face when integrating large organizations with disparate cultures.

Pamela Stoyanoff, MBA, CPA, FACHE, executive vice president, chief operating officer at Methodist Health System, a Dallas-based nonprofit integrated healthcare network with 10 hospitals and 28 family health centers, says that organizational culture exists both at the senior leadership level as well as throughout an organization, and problems can arise because sometimes they can be different.

“You have two senior leadership teams sitting in a room trying to agree on deal points and reach a philosophical agreement. Oftentimes, you have cultural compatibility at the senior level (those who are consummating the deal) but find that culture throughout the remaining levels of the organization is not as conducive to a merger. That is something you don’t necessarily see until later, after the deal is done,” she says.

 

Children’s Hospital Oakland doctors revolt against UCSF partnership

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Children’s Hospital Oakland doctors revolt against UCSF partnership

Children's Hospital Oakland doctors are photographed in front of the hospital in Oakland, Calif., on Wednesday, May 2, 2018. The doctors are upset over the integration of UCSF and Children's Hospital Oakland. They believe UCSF is receiving preferential treatment over the Oakland facility. (Doug Duran/Bay Area News Group)

Doctors in Oakland are revolting against the much-hyped partnership that combined UCSF Benioff Children’s Hospital and Children’s Hospital Oakland, saying the four-year-old deal is turning the world-renowned East Bay hospital into a second-class facility to its San Francisco sibling.

Doctors are fleeing the East Bay hospital, claiming UCSF has prioritized San Francisco, locating most of its specialists and leadership at its new Mission Bay campus over the Oakland facility.

Fewer kids are being hospitalized in Oakland, down about 11 percent since the 2014 merger, according to doctors. Currently, no new patients can get routine psychiatric appointments or can see a lung specialist in Oakland, a community with the highest rate of asthma in Alameda County, the doctors say.

The doctors say a new 89,000-square-foot outpatient clinic opening this month predated the affiliation and hides the problems.“There’s a lot of anger. The anger is palpable,” said Dr. Stephen Long, a pediatric anesthesiologist who has worked at the Oakland hospital for four years and has represented his colleagues in communication with UCSF executives. “At the time (of the affiliation), it was sold to us in a different way. We were told we’d be stronger not weaker. They sold it to us like a healthy marriage, but where it is now feels like a Cinderella adoption.”

Hospital officials dispute the claim saying the Oakland facility is a valued partner and the deal has improved the care and finances.

“There’s a strong commitment in the entire organization to keep a strong presence in the East Bay,” said David Durand, Oakland’s chief medical officer. “We’ve been here for 100 years and we anticipate being here another 100 years.”

Durand said hospital care is shifting to outpatient care rather than treating people inside a hospital, and the Oakland facility saw a 12 percent increase in outpatient care from two years ago, treating about 220,000 kids last year and sending them home.

The new outpatient clinic will increase capacity to 99 exam and treatment rooms, he said, adding that surgical services in the East Bay increased 7 percent over the last two years.

“If UCSF truly values outpatient care, then why are there no (lung specialist) or psychiatry appointments?” Long said, speaking of two departments that have been integrated, others are in the works. “Why has it become so difficult to retain doctors in Oakland or recruit new ones to serve our community?”

Durand said there’s a national shortage in pediatric lung specialists and far fewer mental health providers than patients need in any community. The hospital has about 60 mental health providers, and last year Oakland handled about 60,000 outpatient mental health visits, he said, but there’s always more need.

He added that the Oakland doctor uprising may also be tied to contract negotiations.

Kristof Stremikis, director of market analysis and insight for the California Health Care Foundation, said the UCSF integration is not unique.

“It’s something happening not only across Northern California, but across the state and country,” he said.

Stremikis said the consolidation can create more efficiency and allow the joint venture to command a market and leverage that into higher prices.

The long simmering unrest reached a head on March 6 when Oakland doctors sent a letter, signed by 120 physicians, to UCSF Chancellor Sam Hawgood, addressing their concerns.

The doctors declared “no confidence” in the integration plan and expressed concerns the changes would increase a “health disparity.”

UC

Hawgood wrote back, saying change can be “difficult,” but that the Oakland hospital plans to improve its finances, the facility and the care to the area’s most needy children.

“Our combined mission of service to all children is not — and will not — be compromised,” Hawgood wrote.

Juan Luis Chavez was frustrated that his 2-year-old son Juan Pablo needed an emergency to get required surgery for his lung condition because he had to wait four months to see a lung specialist in Oakland.

The boy, diagnosed with a lung disease called bronchopulmonary dysplasia, was scheduled for surgery in March to close a hole that had developed between his stomach and his skin, but his surgery was canceled when there were no available appointments, his father said.

“We were concerned,” Chavez said. “We had planned for it for quite awhile … when he leaked it was messing up his skin pretty badly.”

Meanwhile, continued meetings between UCSF management and Oakland doctors have not assuaged concerns.

Dr. Julie Saba, a senior cancer scientist at the Research Institute, said the research arm of the Oakland facility has suffered “catastrophically” since the transition. She said so many researchers have left that there is a 30 percent occupancy in available research space, which has led to a major funding drop.

“It has devastated our ranks,” she said. “Our scientific environment is at a catastrophic level.”

She’s worried with insured patients funneled to San Francisco and poorer patients seen at Oakland, the East Bay facility will suffer financially, which will impact the type of care those kids get in Oakland.

“I don’t want to put any intention behind it, all I know is without a significant change with the current plans, this will end up being a second class hospital with poor physician retention and no paying patients,” Saba said. “Like something out of the 1950s.”

 

 

 

71% of Healthcare Orgs Say Mergers and Acquisitions Will Increase

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Compelling results from the new HealthLeaders Media Intelligence Report indicate that M&A activity levels will remain strong for some time.

Healthcare industry merger, acquisition, and partnership (MAP) activity remains strong, with little change in momentum after years of consolidation activity.

According to the 2018 HealthLeaders Media Mergers, Acquisitions, and Partnerships Survey, 71% of respondents expect their organizations’ MAP activity to increase within the next three years, a compelling result indicating that MAP activity levels will remain strong for some time. Only 20% say they expect MAP activity to remain the same, and only 2% expect this to decrease.

“I believe that the healthcare market is still under a lot of pressure from continuing reimbursement and regulatory challenges,” says Pamela Stoyanoff, MBA, CPA, FACHE, executive vice president, chief operating officer at Methodist Health System, a Dallas-based nonprofit integrated healthcare network with 10 hospitals and 28 family health centers.

“The competitive landscape is also changing, with companies entering the healthcare space that haven’t been there before, like Amazon, and unique partnerships forming like Optum buying the Health Care Advisory Board and CVS buying Aetna,” she says.

Sustained activity levels

The case for sustained activity levels over the next few years can be seen in the following: 36% of respondents say that their organization’s MAP plans for the next 12–18 months consist of both exploring potential deals and completing deals underway.

If you combine this result with the response for exploring potential deals (32%), the total reveals that 68% of respondents say they are exploring potential deals, a strong indicator for future MAP activity. Only 12% of respondents say they will be completing deals underway and mention no plans for future MAP activity.

Another aspect that reflects bullish sentiment is the dollar value of MAP activity, with 73% of respondents expecting the dollar value of their organization’s MAP activity to increase within the next three years.

Only 15% expect MAP dollar value to remain the same, and only 2% expect it to decrease. These results are considerably more positive than last year’s survey results, which were increase (55%), remain the same (34%), and decrease (12%).

 

Anthem reports flat operating revenues due to exit from Affordable Care Act market

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Net income increased 30 percent driven by premium rate increases, the return of the health insurance tax and the acquisition of MA plans.

Anthem reported a 30 percent increase in net income for the first quarter compared to the same three months of 2017, but operating revenues remained relatively flat primarily due to the insurer’s planned exits from the Affordable Care Act marketplace.

On Wednesday, Anthem reported net income for the first quarter of $1.3 billion, versus 1 billion for the first three months in 2017.

First quarter operating revenues were relatively flat at $22.3 billion year-over-year due to a decrease in its individual market business.

In 2017, Anthem announced it would cut back its ACA footprint by about 70 percent.

Revenues were helped by premium rate increases to cover overall cost trends, the return of the health insurance tax and the acquisitions of HealthSun and America’s 1st Choice.

Anthem’s acquisition of HealthSun, completed at the end of 2017, added a Medicare Advantage health plan and delivery network in Florida.

The acquisition of America’s 1st Choice was finalized in February. The privately-held, for-profit Medicare Advantage organization  offers HMO products, including chronic special needs plans and dual-eligible special needs plans under its Freedom Health and Optimum brands in Florida. The deal added 135,000 Medicare Advantage members and included a 5 star plan.

Anthem’s medical enrollment totaled approximately 39.6 million members as of March 31, a decrease of 1 million or 2.5 percent percent, from 40.6 million at March 31, 2017.

The company said it now expects medical enrollment to be between 40.1 – 40.3 million for the full year 2018.

Counteracting the individual market decline, Anthem’s government business grew 10 percent year-over-year through a focus on serving the complex social and medical requirements of the dual special needs population.

Medical enrollment declined by 616,000 during the first quarter reflecting a decrease in the individual and local group fully-insured businesses. Medicare grew by 237,000 members and Medicaid enrollment declined by 120,000 individuals.

“We are pleased with our first quarter 2018 financial performance, which reflects our commitment to strong medical cost performance by effectively leveraging community based innovative and integrated clinical and value based care models across our markets,” said CEO and President Gail Boudreaux. “Throughout 2018, we are prioritizing investments to create a more flexible infrastructure that can quickly respond to the evolving needs of our customers and the changing healthcare environment.”

 

Adventist Health, St. Joseph Health sign definitive agreement for Northern California joint venture

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Details are still being worked out about physical locations or shared access to care services and they hope to finalize the arrangement this year.

Adventist Health and St. Joseph Health will partner on a new joint operating company that will integrate clinical activities and services across clinics and facilities in Northern California.

The joint operation will include a new president and CEO, and a few other positions still to be determined. A governing board of consisting of 5 appointees from each system will also be formed. Adventist and St. Joseph facilities would keep their existing hospital names, licenses, capital assets and employees.

“By establishing a network that combines the parties’ footprints in this six county area, we intend to increase patients’ access to care,” said Kevin Klockenga, President & CEO, St. Joseph Health Northern California. “We intend to improve our ability to deliver better care on a number of fronts, including developing a comprehensive care continuum strategy; collaborating on centers of excellence, health information sharing, and care management; and developing a value based provider network.”

Adventist Health President of the Northern California region Jeff Eller added that “patients will benefit from more access points, better health outcomes and controlled costs by coordinating their care across the spectrum of their health needs.”

The new operation will serve municipalities of Humboldt, Mendocino, Sonoma, Lake, Napa and Solano counties.

A definitive agreement has been signed, which covers a joint venture, not a merger. The proposed operation will be under regulatory review. Officials at Adventist Health and St. Joseph Health are working toward a closing of the proposed transaction sometime later this year.

A St. Joseph Health spokesperson said details are still being worked out and it is not clear whether services at the included facilities will expand or whether the joint venture simply means patients in both systems will have access to the other system’s facilities under the new network.