Latest / Becker’s Healthcare Podcast / Health System M&A, Joint Ventures and Rising Financial Pressure with Alan Condon

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Health System M&A, Joint Ventures and Rising Financial Pressure with Alan Condon · Becker’s Healthcare Podcast

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  - There's a small circle of people who truly
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  - understand what it takes to lead a health
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  - system right now. The decisions are enormous.
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  - The variables are constantly shifting, and the stakes
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  - of getting a call wrong don't stay contained.
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  - That's not a complaint. It's a structural reality.
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  - And it's why the most effective c suite
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  - leaders are deliberate about where they go to
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  - pressure test their thinking.
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  - Becker's fourteenth annual CEO and CFO roundtable
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  - brings together more than 1,500
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  - executive level attendees
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  - and nearly 400 speakers for four days built
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  - around growth, financial sustainability,
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  - workforce strategy, and the leadership questions that don't
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  - have easy answers.
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  - Join us November second through the fifth in
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  - Chicago.
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  - For the agenda and event details,
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  - visit beckershospitalreview.com
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  - and click on the events tab in the
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  - upper right.
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  - This is Scott Becker with the Becker's health
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  - care podcast.
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  - We're thrilled today to be joined by Alon
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  - Condon, Alon's editor in chief at Becker's health
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  - care. He He follows a lot on the
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  - health system financial and mergers acquisition side.
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  - Allen, I'm gonna tee it up. I I
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  - happen to be following a couple of your
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  - stories this morning about eight systems
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  - that are selling off some of their hospitals,
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  - also about
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  - Maine Health acquiring another hospital, a tenth hospital.
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  - Seems like there's a lot going on in
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  - the mergers and acquisitions world, again, in the
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  - health system spec space. But let me turn
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  - it to you and ask you what you're
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  - following,
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  - and what that's part of it too.
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  - Yeah. No. Absolutely. I think, certainly a massive
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  - uptick in transactions we're seeing really across the
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  - board. We could kinda cover that initial roundup
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  - you'd referenced in your in your opening there,
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  - Scott, in terms of larger systems really divesting,
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  - some strategic assets, some hospitals in certain markets,
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  - just to name but a few. Common Spirit
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  - is offloading multiple hospitals,
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  - community health systems, of course, on the for
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  - profit side,
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  - Skyon Health as well. I think we sold
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  - eight community hospitals earlier this earlier this year.
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  - Providence is also in the mix there. Banner
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  - selling hospitals, Trivia Health. So not not a
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  - ton of hospitals. I think, one or two
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  - in in certain strategic markets, but we may
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  - certainly see
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  - more of this take place over the coming
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  - quarters of months as health systems really dig
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  - into,
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  - their core markets, where they really wanna grow
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  - and potential offload assets that may be underperforming.
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  - I think
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  - while on the topic of further acquisitions transactions,
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  - I think there's a couple of
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  - unique
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  - transactions that we covered very, very recently.
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  - To kinda dive into two of these, I
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  - think first and foremost is the transaction we
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  - covered a little bit ago, but I think
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  - quite unique that we don't see too many
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  - of these.
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  - And that's, mainly this joint venture partnership
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  - proposed
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  - joint venture partnership between Intermountain Health and AdventHealth.
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  - Really, really interesting this one because it seems
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  - that Intermountain and AdventHealth are pursuing this Colorado
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  - joint venture that would closely resemble
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  - a model that we saw Henry Ford Health
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  - and Ascension do in Southwest
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  - Michigan.
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  - Essentially, AdventHealth's
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  - massive operator, I believe, 57 hospitals in multiple
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  - states, Intermountain,
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  - around about a 34 hospital system in in
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  - a in a couple of states as well.
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  - But this joint venture would essentially
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  - combine
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  - eight hospitals, dozens of physician practices,
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  - urgent care, and outpatient facilities across the Denver
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  - area for AdventHealth and Intermountain.
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  - Under this arrangement,
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  - AdventHealth would essentially lead
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  - and manage the daily operations for those facilities
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  - early, early days, but they're anticipating
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  - a potential closing date in early twenty twenty
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  - seven. And, again, I think really interesting just
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  - to kinda see
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  - Intermountain and Appenheld take a leaf or a
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  - page out of the playbook of what Henry
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  - Ford Health and Ascension did in Southwest Michigan,
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  - in 2024.
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  - So just to kinda give readers a quick
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  - update on that particular deal,
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  - the Ascension and Henry Ford deal brought eight
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  - of Ascension's
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  - hospitals in Southeast Michigan. Excuse me. I said
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  - Southwest, Southeast Michigan.
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  - That deal brought eight of Ascension Southeast Michigan
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  - hospitals and their care assets under the Henry
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  - Ford Health brand and the Henry Ford Health
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  - operating structure, and all five of Henry Henry
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  - Ford Health's acute care hospitals,
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  - other care facilities and assets including
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  - its its health plan were also included in
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  - that in that joint venture.
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  - Really, really interesting deal. It's not a it's
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  - not a joint venture that we typically see
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  - much of, but certainly closely echoes and resembles
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  - what that, what we saw from Henry Ford
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  - Health and Ascension.
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  - In both cases,
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  - one health system appears to contribute a significant
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  - regional portfolio,
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  - while the other health system takes responsibility for
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  - management,
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  - clinical integration, and the broader operating platform. So
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  - really, really interesting deal just to kinda It
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  - it
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  - it it seems like the the Trinity Essential
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  - one's relatively new.
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  - We've since we've seen several other these over
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  - the years, and it seems like I'm always
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  - reading stories of them unwinding.
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  - Why is it what drives an advent and
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  - intermountain to go after this model versus going
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  - it alone? And I know that should be
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  - obvious, I guess, that each of them have
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  - some assets in the community, but not so
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  - many assets in the community to make it
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  - a strong presence.
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  - But but it seems like so many of
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  - these end up not
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  - going great.
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  - So so what drives the decision to do
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  - something, this joint venture arrangement versus taking it
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  - themselves?
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  - Or have they talked about that?
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  - That's a great question. I think they've they've
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  - kinda shared a little bit of insight from
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  - what we heard from the CEOs in terms
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  - of the initial news release. So I think
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  - more certainly to come on that. And from
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  - what we go back to Intermountain's president CEO,
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  - Rob Allen, he talked about
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  - the opportunity to create a more connected
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  - regional care network between these two powerhouse nonprofit
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  - systems.
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  - Intermountain, of course, doesn't have as much of
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  - a presence within that Denver area as as
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  - Advent helped us. But you really look into
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  - you leverage a combined partnership or venture,
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  - to create this connected regional care network there.
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  - But I I think to your point, Scott,
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  - it it is an interesting,
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  - trend. We've seen a certainly an uptake in
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  - these types of joint ventures that have been
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  - unwinding across the country,
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  - working out for maybe different reasons. I'm not
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  - working out for other reasons. I think, speaking
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  - to some some Intermountain executives in the coming
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  - weeks and I've been held as well, they
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  - kinda get a deeper insight into how they
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  - see this playing out, how they envision it,
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  - how closely it does resemble other joint ventures.
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  - So more to come certainly there, but I
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  - think an interest in turn and interest in
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  - transaction that both of those big, big, large
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  - nonprofit systems are pursuing,
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  - in Colorado.
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  - No. But it does seem to be the
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  - point there. Each are contributing assets, each by
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  - themselves,
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  - might not have enough assets to really compete
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  - with the HCA's in that area or with
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  - the with the University of Colorado in that
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  - area and some of the other systems. So
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  - maybe combining assets
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  - allows them to have a more significant presence
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  - and provide better services,
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  - probably a better word than to compete better,
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  - but they have a more significant presence be
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  - a magnet for
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  - staff, for physicians, for patients, and so forth
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  - that they can combine those efforts. It it
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  - just seems like there's been so much of
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  - that. There was another joint venture that was
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  - that I think common spirit was part of
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  - in that area of the world that ended
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  - up unwinding as well. And so I I
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  - do I do wonder in the long run
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  - whether when systems are in these joint ventures,
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  - whether they end up with
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  - not as much commitment to them as to
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  - when they really own it as part of
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  - their own system directly, but maybe it's the
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  - right compromise for this region and and it's
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  - an openness to looking at it a different
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  - way.
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  - Yeah. Yeah. Absolutely. And I think there there
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  - hasn't been much disclosed on the the future
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  - brand of this joint venture yet. The governance
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  - structure or ownership percentages. I think more to
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  - come there. But I think to your point,
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  - Scott, yeah, I think that model certainly in
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  - the in that region of the country can
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  - allow those systems to maybe combine that scale,
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  - that market reach,
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  - without completing maybe a full on
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  - conventional acquisition or maybe a full corporate merger.
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  - But,
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  - I'm certainly interested to kind of pay attention
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  - to how that deal plays out and how
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  - regulators look at all coming quarters.
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  - Really interesting. And your point on the regulators
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  - is not to be understated because there's always
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  - big concerns about when you joint venture between
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  - two large systems, does it create antitrust issues
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  - and take away a competitor or not? And
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  - what will that look like too? But I
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  - think that's actually a great point as well,
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  - how the regulators will take a look at
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  - that too. Fascinating.
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  - So, Alan, that's one story, and that's really
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  - interesting. It's around in the advent getting together
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  - in the Colorado market or the Denver market.
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  - What else are you watching closely currently that
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  - that is top of mind?
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  - Yeah. I I think,
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  - nice segue here on on on the point
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  - of regulators. I think
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  - a smaller deal, but I think just certainly
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  - interest in unique. Jumping over to to Oregon,
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  - we've been covering this deal for last couple
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  - of months, and that's Oregon's,
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  - attorney general attorney general this week has
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  - fast tracked essentially approved this merger between Salem
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  - Health, the two hospital system in Oregon, and
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  - San Antonio Memorial Hospital, one one hospital system
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  - there as well.
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  - I think this is an interesting, slightly unique
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  - case as well and that this merger was
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  - announced in in January.
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  - But we just saw last month that the
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  - house systems filed for an emergency exemption last
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  - month to allow this proposed merger to proceed
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  - without a full
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  - state health care market review. So,
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  - Santiam Memorial had warned regulators that it faced,
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  - imminent risk of insolvency,
• 9:28
  - citing declining profits, the need to replace its
• 9:31
  - its EHR system.
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  - It said it's got an epic contract that
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  - terminates in 2027
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  - and that it really has to begin transitioning
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  - to a new a new EHR system by
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  - September of this year. So that's just coming
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  - next month, but
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  - really lacks the capital for the project. So
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  - insolvency, a huge, huge issue for Santee Memorial,
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  - led it to to file this emergency exemption
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  - for this,
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  - for this for this state health care review.
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  - So
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  - Oregon state regulators have now granted the the
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  - the systems an emergency exemption,
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  - citing really an urgent threat to health care
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  - access in the region. So because of that
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  - exemption,
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  - the the state health care agency cannot impose
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  - conditions on the deal. It cannot conduct any
• 10:15
  - follow-up reviews under current state law as well.
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  - I think, again, it's a two hospital system
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  - and an independent hospital emergency there in Oregon,
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  - but we we know how difficult, and how
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  - acute the challenges have been in the Pacific
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  - Northwest,
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  - specifically in relation to workforce,
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  - how hospitals are performing there as well. I
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  - think it's quite rare that we see health
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  - systems file for this kind of emergency exemption
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  - to to fast track this merger and perhaps
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  - even more rare that state regular regulators actually
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  - sign off on it, but certainly shows that
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  - the increasing pressure that many hospitals and hospitals
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  - systems are under and what regulators might be
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  - willing to do to make sure they're preserving
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  - health care access in those in those regions
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  - as well.
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  - Yeah. No. I think that's I I think
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  - that's exactly, right. I mean, you give Oregon
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  - some credit
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  - for for actually
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  - moving forward and the expediting this and and
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  - noting the real
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  - challenges
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  - and and real problems out there. Right? I
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  - mean, is it you really give him credit
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  - that.
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  - Absolutely. Yeah. And I think, you know, we've
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  - speaking of kind of,
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  - mergers, acquisitions, unwinding as well, staying in Oregon,
• 11:21
  - we we focus on OHSU,
• 11:23
  - Oregon Health, and and certain sciences university.
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  - There's a sales system that tried to merge
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  - with another health system quite a while ago.
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  - That never made it get over the line.
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  - They're also looking at a new partnership there.
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  - I think there's multiple,
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  - proposed deals and transactions at hospitals and health
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  - systems within Oregon at the moment that are
• 11:40
  - currently waking making its way through regulators.
• 11:43
  - Definitely in a part of the country that
• 11:45
  - was,
• 11:46
  - more acutely challenged in some cases, but I
• 11:48
  - think a lot of good work been done
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  - there by health care leaders.
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  - Hopefully, more optimism to come down the line.
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  - But we'll pay close attention to to m
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  - and a activity in Oregon and the wider
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  - Pacific Northwest as well. Certainly, a very interesting
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  - part of the country.
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  - Completely. And it should see a state that's
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  - been so regulatory prone
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  - giving the the wave to this to move
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  - it forward and and avoid more problems because
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  - the last thing they want is another hospital
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  - closing. And it's interesting to see him actually
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  - be flexible and show that approach. I I
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  - admire it.
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  - I might to be to be admired, and
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  - I wonder if maybe other states, Scott, might
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  - might take a leak take a leak out
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  - of that playbook as well. Certainly, they're they're
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  - they're not alone. And then the hospitals here
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  - are kinda quite struggling independent hospitals looking for
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  - partnerships, looking for that larger health system partner.
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  - Many, many at risk of insolvency as well.
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  - I wonder if we might see other state
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  - regulators take a take a a closer look
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  - and a similar look at transactions,
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  - in their own states as well.
• 12:40
  - Eowen, a 100%. I I I wanna thank
• 12:42
  - you as always for joining us on the
• 12:44
  - Becker's Healthcare podcast. You bring such clarity of
• 12:46
  - thought to what you do. Just fantastic.
• 12:49
  - Love today discussing both the Advent Intermountain
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  - deal in in Denver,
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  - as well as the Salem Hospital in Oregon
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  - moving forward to prove that and move it
• 12:59
  - past the regulatory challenges because of potential financial
• 13:02
  - problems and the and the risk of closing
• 13:04
  - down. Alan, as always, thank you so much
• 13:06
  - for joining us today at the Beckers HealthCare
• 13:08
  - podcast. Just fantastic. Thank you. Scott, always a
• 13:11
  - pleasure. Thanks so much.