A Hospital Valentines’ Day Breakup

Join 18,000+ executives and investors from leading healthcare organizations including Privia, ApolloMed, and HCA Healthcare, health systems including Providence, Ascension, and Atrium, as well as leading digital health firms like Cityblock, Oak Street Health, and Turquoise Health by subscribing here!

A Valentine’s Day Hospital Break-up

CommonSpirit Health and AdventHealth, two of the largest nonprofit health systems in the U.S., decided to end their joint operating agreement (JOA) Centura Health – on Valentine’s day, no less! The two will unwind Centura Health’s 20 hospital footprint, with 5 hospitals sitting with Advent and the remaining 15 under CommonSpirit (legacy Catholic Health Initiatives) operation.

Context: Centura Health formed in 1996 as a joint operating company between CommonSpirit and AdventHealth and operates throughout Colorado and Kansas. As recent as mid 2022, Centura was acquiring hospitals as a 20-hospital system with $5B in revenue and 6,000 physicians, with plans to hit $7 billion. Historically, CommonSpirit received 70% of Centura revenues while Advent got the remaining 30%.

Blake’s Take: All of a sudden, a flurry of activity for CommonSpirit and in Colorado. Along with disbanding the joint operating agreement between the two, CommonSpirit is also purchasing Steward Health Care’s 5 hospitals in Utah for $685M (which – side note – might be a welcome cash reprieve for Steward). And yes, these are the same hospitals that HCA was unsuccessful in purchasing last year due to FTC involvement.

According to the press release, Centura Health will manage these hospitals, so the details are a bit confusing now given that Centura is dissolving. Logistics aside, in the span of a week, CommonSpirit will absorb 15 Centura hospitals & their affiliated outpatient footprints that generated $3B in Colorado revenue in 2020. Then it’ll add on the 5 Utah hospitals with 40 clinics and other services.

Don’t forget about other activity happening in Colorado. In early January, Utah-based health system Intermountain Healthcare partnered with Colorado-based UC Health. Under the joint venture, the two powerhouse health systems will form a clinically integrated network (CIN) in the Colorado area.

Bigger picture: This announcement comes on the heels of several recent JOA ‘de-consolidations.’ In Chicago, the 19-hospital system JOA Amita Health dissolved between AdventHealth and Ascension in April 2022. Also in April, Trinity and CommonSpirit broke up their JOA in Iowa, MercyOne. Trinity bought out CommonSpirit’s share of MercyOne and now holds 100% of its ops – 16 hospitals, 420 sites of care, and more. To speculate further, I have to imagine that all of this hospital and JOA realignment stems from increasing pressure on health system performance as margins get squeezed. It’s more important than ever to have your hospital portfolio streamlined rather than having other cooks in the kitchen potentially prioritizing other things.

Hospital M&A to keep on your radar…

Sanford has decided to ‘voluntarily’ delay its merger with Fairview til May. Sanford has failed merges with other health systems multiple times in recent memory, including Fairview itself a decade ago. Seems like they’re doing everything they can do get to the finish line…quickly. (MPR)

In NY, SUNY Upstate Medical University and Crouse Health System dropped their proposed merger after FTC intervention. (FTC)

Finally, Tower Health and Penn Medicine called off their affiliation (HSIN)

Partnerships and Strategy Updates:

Privia Health announced its latest partnership with Community Medical Group to launch a clinically integrated network (CIN) comprised of 1,100 multi-specialty providers – this includes 430 primary care providers and 450 clinics. The CIN will cover 180,000 lives, of which 29,000 are Medicare beneficiaries (16% which seems oddly low?). 10,000 of these beneficiaries already participate in MSSP for 2023.

This Wall Street Journal overview of Walgreens’ strategy in healthcare was a solid read, profiling its recent acquisition of Summit in conjunction with VillageMD. Hilariously, WSJ characterizes Summit as an owner of ‘urgent care clinics’ when in reality the multispecialty physician base is the much more compelling offering. In recent years, Walgreens bought Shields Health Solutions and CareCentrix, all aimed at healthcare services outside of the traditional pharmacy business. One thing is clear: retail pharmacy is on the decline.

• As Advisory Board pointed out, CVS’ market cap has doubled since its acquisition of Aetna while Walgreen’s has dropped by 60%+. They seem to be catching on, despite 80% of its revenues still coming from pharmacy sales. On the other hand, CVS generates one third of its revenues from pharmacy while its other healthcare segments (PBM and Aetna) account for the bulk of the biz. (WSJ)

UChicago Medicine is seeking Chicago approval for an $815M standalone cancer hospital. (Link)

Post-acute specialist Select Medical announced a joint venture with AtlantiCare in New Jersey. Along with opening a new inpatient rehabilitation facility, Select will also contribute 13 of its physical therapy clinic locations (NovaCare) and manage the operations of both. (Link)

Physicians Health Plan of Northern Indiana partnered with Premise Health, a primary care provider, to open a primary care center for its members. It’ll serve fully insured employer populations. (Link)

Finance and M&A Updates:

Apollo Global Management and HPS Investment Partners are helping to support the Carlyle Group’s $15B buyout of health analytics giant Cotiviti. “The deal would include a stunning $5.5 billion private loan, one of the largest-ever direct loans in the private credit market.” (Axios)

Hospital margins in Alabama have dropped 79 percent since the start of the pandemic, despite receiving financial assistance directly from the federal government and federal funds distributed through the state. Currently, 50 percent of Alabama’s hospitals are operating in the red. (ALAHA) Couple this with 45% of Tennessee hospitals at risk of closure, up from 23% in 2019. (Beckers)

Home health & hospice operator Amedisys is divesting its personal care segment to HouseWorks. (HHCN)

Davis Health System and Vandalia Health announced a partnership in the West Virginia area around several service lines, including oncology and nephrology. (CAMC)

Pharos Capital sold a majority stake of its investment in MOTION PT to physical therapy operator Confluent Health. MOTION holds a sizable presence – 59 clinics – throughout the Northeast. (Press Release)

Waud Capital announced a partnership with Steve Jakubcanin to pursue a platform investment in the broader home care and post-acute services market, anticipating an investment up to $100M. (Press Release)

Digital Health and Startup Updates:

Talkspace launched a new employer offering called Talkspace Engage providing new resources for employees. (MedCity)

DWP Capital led a $2.5M into Statera, a SaaS tool focused on physician compensation and burnout. (Link)

Alo, a physician enablement platform, is forming a CIN in North Carolina and holds an existing partnership with Avance Care. (Press Release)

Several health systems including the Mayo Clinic, UF Health and Mass General Brigham have received a $23.5 million grant to advance the use of artificial intelligence in ICUs. (Beckers)

Policy and Payment Updates:

Senator Tammy Baldwin is investigating Ascension Healthcare as scrutiny around nonprofit health systems picks up. (Beckers)

Keep an eye on nurse staffing mandates legislation headed through 5 states – many bills floating around aimed at addressing clinical workforce retention. (Beckers)

HHS’ first 6 qualified health information networks under TEFCA: Epic, CommonWell Health Alliance, eHealth Exchange, Health Gorilla, Kno2 and Konza (HCD)

Costs, Data, and Other Updates:

A whitepaper from the CRFB estimates that site neutral payment policies would reduce national health expenditures by $458 billion.

Epic Research indicates that missed cancer screenings during ‘Rona have not yet been associated with increased cancer rates or severity and most seem to have returned to normal. (Epic)

Prices for surgical procedures are significantly higher at healthcare facilities within networks than at independent hospitals. In other news, grass is green. (HCD)

This was a good overview of the ‘food as medicine’ movement. (Advisory)

10 CEOs from healthcare made the list of the 100 most overpaid CEOs in the U.S. It’s down from 17 in last year’s. (Beckers)

Whitepapers and Resources

Particle Health published a really nice resource on the state of healthcare’s national network data exchanges in 2023. (Particle)

A study conducted of hospital boards found that “among the 529 board members, 44 percent had a background in finance. Among them, more than 80 percent led private equity funds, wealth management firms, or multinational banks. The remainder were in real estate (14.7 percent) or insurance (5.2 percent).” (Beckers)

Hospitalogy Top Reads

• Steak dinners, sales reps, and risky procedures: inside the big business of clogged arteries. (Propublica)
• Vick’s Picks discussed innovations in end-of-life care across hospice, advance care planning, and more. (Vicks Picks)
• Eric Topol had a nice distillation of the Hospital at Home movement (Topol)

That’s it for this week! Join 18,000+ executives and investors from leading healthcare organizations including HCA, CVS, and OneOncology, nonprofit health systems including Providence, CommonSpirit, and Atrium, as well as leading digital health firms like Tia, Carbon Health, and Aledade by subscribing here!