Tag Archives: Market Consolidation

UPMC moves ahead on purchase of PinnacleHealth

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http://www.healthcaredive.com/news/upmc-moves-ahead-on-purchase-of-pinnaclehealth/449305/

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Dive Brief:

  • UPMC have reached a definitive agreement to with Harrisburg-based PinnacleHealth to be acquired, Philly.com reports.
  • The deal paves the way for UPMC to expand its market share in central Pennsylvania and compete directly with the University of Pennsylvania Health System, which owns Lancaster General Health.
  • Last month, Pinnacle bought four central Pennsylvania hospitals from Community Health Systems, a Tennessee-based hospital chain. The purchase included Lancaster Regional Medical Center and Heart of Lancaster Regional Medical Center.

Dive Insight:

The deal, first announced in March, is UPMC’s largest ever and the first to involve an entire health system. Previous purchases have involved single hospitals, the most recent being Sunbury Community Hospital and Lock Haven Hospital from Quorum Health. Those hospitals will become part of Williamsport, Pa.-based UPMC Susquehanna, which was added to the UPMC system last fall.

With Pinnacle’s acquisition now on track, UPMC also stands to boost its health insurance product line, which accounted for close to half of its 2016 operating revenue. The move will pit UPMC Health Plan against Capital BlueCross and Highmark, which together have 75% of the central Pennsylvania market. Aetna holds the rest.

Gaining a foothold in the Harrisburg region could help to compete with Highmark, which four years ago bought Pittsburgh-based Allegheny Health Network, putting it in direct competition with UPMC’s medical and coverage operations.

Merger and acquisition activity has kept up a steady pace this year, with no signs of abating. Reasons for deals include declining admissions, rising costs and a desire to expand into new regions or service lines.

In May, Cleveland Clinic and Dover, Ohio-based Union Hospital signed a letter of intent to merge Union into Cleveland Clinic. The move will expand Cleveland Clinic’s footprint into southern Ohio, while bringing new services and resources to Union, officials said at the time.

Cleveland Clinic CEO Toby Cosgrove, who is stepping down later this year, said in April that consolidation and a greater focus on telemedicine would help providers transition from volume to value payment as healthcare reform continues to evolve.

UPMC expects to complete the acquisition September 1, pending regulatory approvals. For the fiscal year ended June 30, 2016, Pinnacle reported revenue of $1.05 billion.

Investment firm Kohlberg Kravis Roberts closes $2.4 billion deal with Envision Healthcare, acquires Covenant Surgical Partners

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http://www.healthcarefinancenews.com/news/investment-firm-kohlberg-kravis-roberts-closes-24-billion-deal-envision-healthcare-acquires?mkt_tok=eyJpIjoiT0RabE1UVmtZamMzTldOaCIsInQiOiJIRmpRNFJxRnFHbG9vRGV6UXZGMzZJbmZXOEZRczZRcktRb3Z4VzZHQ01UYUdoVElGRlNGVTUrRytER3FteTZSMTdXMjdjM0dlVnlrT01CS2RSNDhCa2tuRTNvbkhVMmlkU0RWQ3pvQ0lrTGVPMnkyUG8ySGJOaGhQc0FLbWUyaSJ9

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Envision and WebMD deals are valued at more than $2 billion each; financial terms of Covenant deal were not disclosed.

Global investment firm Kohlberg Kravis Roberts & Co has announced they will buy Covenant Surgical Partners. Financial details were not disclosed.

Covenant buys and operates ambulatory surgery centers and physician practices, and touts 37 facilities located across 17 states.

The deal is expected to close in the third quarter of FY 2017.

The announcement comes just a day after another major, much-anticipated deal was unveiled. KKR’s Air Medical Group Holdings will merge with Envision Healthcare’s transportation subsidiary American Medical Response to form an entirely new medical transportation company, a transaction worth $2.4 billion, KKR said.

The combined company is expected to transport more than five million patients per year with air and ground ambulances across 46 states and the District of Columbia, KKR said in a statement.

Envision’s President of Ambulatory Services Randall Owen will step in as President and CEO of the new company, and when the deal is done, a new company name will be designated.

That deal is scheduled to close in the fourth quarter of 2017.

Envision Healthcare owns and operates 263 surgery centers and one surgical hospital in 35 states and the District of Columbia, with medical specialties ranging from gastroenterology to ophthalmology and orthopedics.

“The Envision leadership team conducted a robust process to review strategic alternatives for AMR. The agreement delivers on our commitment to continue the proud tradition of AMR and enables Envision to focus on its physician-centric strategy and ongoing services, including facility-based provider services, post-acute care and ambulatory surgery,” said Christopher A. Holden, Envision’s President and Chief Executive Officer.

A little more than a week ago, KKR also revealed their deal for their company Internet Brands to buy WebMD in a transaction valued at approximately $2.8 billion.  This acquisition is also expected to close in the fourth quarter of 2017.

Healthcare’s Consolidation Landscape

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Market and regulatory factors have unleashed a wave of merger, acquisition, and partnership activity that is changing the delivery of healthcare services.

Consolidation in the healthcare-provider sector has accelerated in recent years, reshaping the relationships between health systems, hospitals, and independent physicians across the country.

In the Buckeye State, healthcare consolidation activity has been a transformational force at OhioHealth, says Michael Louge, CPA, who serves as executive vice president and chief operating officer at the 11-hospital health system based in Columbus.

“When you look at OhioHealth, and you go back two or three decades, it was a much different organization. The reason it is different today is because of philosophy and the way we approach regional partnerships—how we have worked with physicians and hospitals in the region. Our whole organization’s evolution has been through successful partnerships and consolidations with regional players.”

Over the past year, statistics have been gathered on the pace of healthcare-provider consolidation.

In a recent HealthLeaders Media survey, 159 healthcare executives—mainly from health systems, hospitals, and physician practices—were asked about their merger, acquisition, and partnership (MAP) deals.

Eighty-seven percent of the respondents said their organizations were expected to both explore potential deals and complete deals that were underway in the next 12–18 months. Only 13% of the respondents said their organizations were not planning MAP deals in that same time period.

From the passage of the Patient Protection and Affordable Care Act (PPACA) in 2010 through the end of last year, merger and acquisition transactions involving acute-care hospitals increased 55% from 66 announced deals to 102, according to Skokie, Illinois–based Kaufman Hall. Last year, the operating revenue of acquired organizations was more than $22 billion, according to the consultancy.

Kit Kamholz, managing director at Kaufman Hall, says two sets of drivers are propelling consolidation activity among health systems and hospitals.

“There are transactions that are driven by financial rationale. This is driven by a level of distress at the smaller organization, either from a historical-financial standpoint, an access-to-capital standpoint, or they are experiencing some significant clinical deficiencies. … The second bucket is in the category of strategic rationale. These are organizations that tend to be relatively strong financially, that are considered to be strong community-based providers in their marketplaces; but they are looking at the landscape of the evolving healthcare environment and saying, ‘Do we have the skills and capabilities to be successful in this new era of value-based care?’ ”

Healthcare consolidation activity is impacting the country’s physician practices and physician-employment trends.

12 recent hospital transactions and partnerships

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http://www.beckershospitalreview.com/hospital-transactions-and-valuation/12-recent-hospital-transactions-and-partnerships-51517.html

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The following healthcare mergers, acquisitions and general partnerships took place or were announced the week of May 15.

1. Erlanger in talks to acquire or affiliate with 25-bed Murphy Medical Center
Erlanger Health System, a five-hospital system in Chattanooga, Tenn., is in talks to partner with 25-bed Murphy (N.C.) Medical Center.

2. 3rd hospital joins Beth Israel Deaconess, Lahey Health merger
Newburyport, Mass.-based Anna Jaques Hospital is the third health system to join the proposed merger between Boston-based Beth Israel Deaconess Medical Center and Burlington, Mass.-based Lahey Health, bringing the total number of health systems interested in merging up to five.

3. Quorum to divest 2 hospitals in Tennessee
Brentwood, Tenn.-based Quorum Health Corp., signed a definitive agreement May 15 to sell two hospitals in Tennessee.

4. Steward Health Care to acquire IASIS Healthcare
Boston-based Steward Health Care signed a definitive agreement to acquire Franklin, Tenn.-based IASIS Healthcare.

5. Mount Auburn joins Beth Israel Deaconess, Lahey merger: 3 things to know
Cambridge, Mass.-based Mount Auburn Hospital will join a proposed merger between Boston-based Beth Israel Deaconess Medical Center and Burlington, Mass.-based Lahey Health.

6. Quorum Health seeks to sell 6 more hospitals
Brentwood, Tenn.-based Quorum Health, the 35-hospital spinoff of Franklin, Tenn.-based Community Health Systems, plans to sell six hospitals to restructure its portfolio to improve financial performance.

7. Accumen partners with SSM Health hospital to improve quality of care, patient outcomes
SSM Health Saint Louis University Hospital partnered with Accumen on a multiyear agreement to implement a comprehensive patient blood management program.

8. Geisinger Health System, Jersey Shore Hospital sign integration agreement
Danville, Pa.-based Geisinger Health System and 25-bed Jersey Shore (Pa.) Hospital and Foundation signed an agreement integrating Jersey Shore’s facilities into Geisinger.

9. HealthEast, Fairview Health Services receive final OK to merge
The respective boards of directors of HealthEast, a four-hospital system in St. Paul, Minn., and Fairview Health Services, a seven-hospital system in Minneapolis, approved the organizations’ plans to merge, effective June 1. The merger will create one of the largest hospital networks in Minnesota.

10. Hackensack Meridian, St. Joseph’s Healthcare to partner on home health, hospice services
Hackensack Meridian Health, a 13-hospital system in Edison, N.J., and Paterson, N.J.-based St. Joseph’s Healthcare revealed plans to form a jointly owned home health services agency and a hospice services agency.

11. Yale New Haven, Day Kimball Healthcare partner to improve clinical care
Yale New Haven (Conn.) Health System and Putnam, Conn.-based Day Kimball Healthcare inked an agreement to become community partners and enhance the breadth of clinical care services available at Day Kimball.

12. Wake Forest Baptist partners with Northern Hospital of Surry County on cardiac rehabilitation care
Winston-Salem, N.C.-based Wake Forest Baptist Medical Center and Mount Airy, N.C.-based Northern Hospital of Surry County will partner to provide residents with better access to cardiac rehabilitation services.

Top 10 MACRA Considerations for Providers

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Most physician practices are running a race against time to implement Medicare’s value-based payment system, survey data indicates. They have a lot to think about as they go about it.

As Medicare’s reviled Sustainable Growth Rate (SGR) formula for physician reimbursement fades to extinction, its replacement, the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015, is posing a new set of challenges.

This week Black Book Research identified 10 of the top MACRA challenges that physician practices are facing. The survey is based on responses from 8,845 physician practices collected from February to April.

1. MIPS compliance technology: Physician practices are seeking technological solutions to help them achieve reporting compliance, with 77% of practices that have at least three clinicians mulling the purchase of Merit-Based Incentive Payment System Compliance Technology Solutions (MIPS) software.

2. Electronic Health Record (EHR) optimization: MACRA appears to be a golden opportunity for the largest EHR vendors. For the top eight EHR companies, 83% of their physician-practice users reported working to upgrade their system for MIPS compliance. At physician practices with smaller EHR vendor partners, however, 72% reported they were not working with their vendor partner to upgrade their system for MIPS compliance.

3. Consultant opportunity: The EHR capabilities required for participation in MIPS or Alternative Payment Models (APMs) represent a business opportunity for EHR consultants. Most (80%) of physician practices report that conducting a technology inventory is key to strategic planning for a value-based payment system.

4. Data wrangling: Taming data to conform with the reporting requirements of MIPS and APMs is daunting for many physician practices. At practices with at least four clinicians, 81% of physicians report being unable to align their data with the new reporting requirements.

5. Paying for procrastination: Physician practices that have not developed an in-house strategy for participating in MIPS or an APM are looking for outsourcing options. Of these practice procrastinators, 80% are planning to find turnkey software or a MACRA-administration partner this year.

6. MACRA-induced physician-practice consolidation: Black Book found that three-quarters of independent physician practices surveyed are considering selling their practice to a health system, hospital, or large group practice because of the regulatory and capital-cost burdens of MACRA.

In an equally dour data point, 68% of independent physicians predicted that MACRA would either burden or bankrupt their practice by 2020.

7. Economic incentives: For the first five years of the Quality Payment Program, there are powerful economic incentives to beat the MIPS performance threshold.

In 2019, MIPS is set to redistribute about $199 million from physicians who perform below the performance threshold to physicians above the threshold, and this redistribution mechanism is set to expand over time.

There also is $500 million in supplemental funding available for each of the first five years of MIPS implementation. To chase these opportunities, 64% of hospital-networked physician organizations reported including incentives in physician-compensation packages to boost MIPS performance.

8. Reputation risk: A majority (54%) of those surveyed did not know that MACRA would result in performance data being reported publicly through Medicare’s Physician Compare website and other rating systems.

9. ACO appeal: Joining an accountable care organization can increase the odds of MIPS success through penalty avoidance and resource utilization bonuses. Small physician practices have taken notice, with 67% considering joining an ACO to increase the likelihood of MIPS success.

10. Cost and quality transparency: Based on its physician-practice survey and other research, Black Book Research expects MACRA to be one of the market factors driving healthcare cost and quality transparency.

One survey noted 52% of large group practices, independent practice associations, ACOs, and integrated delivery networks reported they were preparing to release cost and quality measures for individual physicians by next year.

 

Healthcare Competition Needs a Priority Check and Reset, Experts Say

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http://www.healthleadersmedia.com/leadership/healthcare-competition-needs-priority-check-and-reset-experts-say

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Farzad Mostashari, MD, the former National Coordinator for Health IT at the Department of Health and Human Services, and Martin S. Gaynor, a professor of economics and health policy, discuss how policy helps and/or harms competition in the healthcare marketplace.

Despite the near-universal agreement that the U.S. healthcare delivery system should remain market-based, there has been surprisingly little talk amongst government policy makers and private payers about the potential for stifling competition with over-regulation.

An essay this month in JAMA calls for a re-examination of how healthcare rules, regulations, and policies help or harm competition in the healthcare marketplace.

Farzad Mostashari, MD, the former National Coordinator for Health IT at the Department of Health and Human Services, and Martin S. Gaynor, a professor of economics and health policy at Carnegie Mellon University, two authors of the essay, spoke with HealthLeaders last week. The following is a lightly edited transcript.

How has Obamacare impacted state health care marketplaces?

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https://www.brookings.edu/research/how-has-obamacare-impacted-state-healthcare-marketplaces/?utm_campaign=Brookings+Brief&utm_source=hs_email&utm_medium=email&utm_content=42427416

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The Affordable Care Act (ACA) changed the nature of competition among health plans by creating regulated insurance exchanges, introducing new insurance industry regulations, and providing premium and cost-sharing reduction subsidies. Through these reforms, the law aimed to increase access to and the value of insurance coverage while lowering costs. To better understand the law’s implementation and its effect on competition, researchers with the ACA Implementation Research Network interviewed key marketplace stakeholders to analyze why carriers chose to enter or exit markets, how provider networks were built, and how state regulatory decisions affected the landscape.

As Congress and the new Administration deliberate on what’s next for the law, the Network presents their analyses of competition in California, Florida, Michigan, North Carolina, and Texas (PDFs). A summary report(PDF) of the general findings, authored by Texas A&M Professor Michael Morrisey, Brookings Senior Fellow Alice Rivlin, ACA Network Lead Richard P. Nathan, and Mark A. Hall, Brookings Nonresident Senior Fellow, is intended to generate hypotheses for further testing across state marketplaces and to identify individual idiosyncrasies within the states that provide context for national- and state-level reforms.

CONCLUSION

While the results of this five-state study may not be applicable across the country, the authors emphasize a few key lessons for further consideration when crafting a potential replacement plan or changes to the law:

    1. Health insurance markets are local and depend on the ability of insurers to create competitively priced plans. While this is often more difficult in rural locations, metropolitan areas also see variation in competition.
    2. Higher-than-expected claims costs caused concern for insurers initially, as they lacked information on the amount of health care service utilization to expect from exchange enrollees. It remains to be seen whether the trend will continue or if recent market adjustments reflect a “one-time correction.”
    3. Insurer networks have narrowed, which potentially provides greater opportunity for insurers to negotiate lower prices by assuring a greater volume of patients to a more limited number of providers. The number of preferred provider organization (PPO) exchange plans has also been decreasing, as these plans had disproportionate enrollment of people with pre-existing conditions and are generally less able to negotiate low prices from providers.
    4. Both hospital and provider competition are vital for competitive markets, with population and the number of physician groups and health systems playing a role in cost competition.

What Made Obamacare Succeed In Some States? Hint: It’s Not Politics

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http://khn.org/news/what-made-obamacare-succeed-in-some-states-hint-its-not-politics/

People standing in line at the Panorama Mall to sign-up for Covered California at an enrollment event in 2014. (Irfan Khan/Los Angeles Times via Getty Images)

Ask anyone about their health care and you are likely to hear about ailments, doctors, maybe costs and insurance hassles. Most people don’t go straight from “my health” to a political debate, and yet that is what our country has been embroiled in for almost a decade.

A study out Thursday tries to set aside the politics to examine how the insurance markets function and what makes or breaks them in five specific states.

Researchers from The Brookings Institution were exploring a basic idea: If the goal is to replace or repair the Affordable Care Act, then it would be good to know what worked and what failed.

“The political process at the moment is not generating a conversation about how do we create a better replacement for the Affordable Care Act,” said Alice Rivlin, senior fellow at The Brookings Institution, who spearheaded the project. “It’s a really hard problem and people with different points of view about it have got to sit down together and say, ‘How do we make it work?’”

The researchers focused on California, Florida, Michigan, North Carolina and Texas, interviewing state regulators, health providers, insurers, consumer organizations, brokers and others to understand why insurance companies chose to enter or leave markets, how state regulations affected decision making and how insurers built provider networks.

“Both parties miss what makes insurance exchanges successful,” said Micah Weinberg, president of Bay Area Council Economic Institute who led the California research team. “And it doesn’t have anything to do with red and blue states and it doesn’t have anything to do with total government control or free markets.”

Despite the political diversity of the five states, some common lessons emerged. Among them:

 

U.S. judge finds that Aetna deceived the public about its reasons for quitting Obamacare

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http://www.latimes.com/business/hiltzik/la-fi-hiltzik-aetna-obamacare-20170123-story.html

Mergers in the healthcare sector: why you'll pay more

Aetna claimed this summer that it was pulling out of all but four of the 15 states where it was providing Obamacare individual insurance because of a business decision — it was simply losing too much money on the Obamacare exchanges.

Now a federal judge has ruled that that was a rank falsehood. In fact, says Judge John D. Bates, Aetna made its decision at least partially in response to a federal antitrust lawsuit blocking its proposed $37-billion merger with Humana. Aetna threatened federal officials with the pullout before the lawsuit was filed, and followed through on its threat once it was filed. Bates made the observations in the course of a ruling he issued Monday blocking the merger.

Aetna executives had moved heaven and earth to conceal their decision-making process from the court, in part by discussing the matter on the phone rather than in emails, and by shielding what did get put in writing with the cloak of attorney-client privilege, a practice Bates found came close to “malfeasance.”

The judge’s conclusions about Aetna’s real reasons for pulling out of Obamacare — as opposed to the rationalization the company made in public — are crucial for the debate over the fate of the Affordable Care Act. That’s because the company’s withdrawal has been exploited by Republicans to justify repealing the act. Just last week, House Speaker Paul Ryan (R-Wisc.) cited Aetna’s action on the “Charlie Rose” show, saying that it proved how shaky the exchanges were.
Bates found that this rationalization was largely untrue. In fact, he noted, Aetna pulled out of some states and counties that were actually profitable to make a point in its lawsuit defense — and then misled the public about its motivations. Bates’ analysis relies in part on a “smoking gun” letter to the Justice Department in which Chief Executive Mark Bertolini explicitly ties Aetna’s participation in Obamacare to the DOJ’s actions on the merger, which we reported in August. But it goes much further.

Top managed care trends to watch in 2017

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http://managedhealthcareexecutive.modernmedicine.com/managed-healthcare-executive/news/top-managed-care-trends-watch-2017?cfcache=true&ampGUID=A13E56ED-9529-4BD1-98E9-318F5373C18F&rememberme=1&ts=13012017