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Prime Healthcare Foundation Expansion and Health System Financial Turnarounds with Alan Condon · Becker’s Healthcare Podcast

• 0:01
  Every year, Becker's annual meeting brings health care
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  leaders together to unpack the most pressing issues
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  facing the industry.
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  And every year, those conversations shift in profound
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  and unexpected ways.
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  This April, more than 3,500
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  health care executives will return to Chicago
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  for Becker's sixteenth annual meeting.
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  795
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  elite speakers will offer new lessons, new case
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  studies, and predictions about what comes next.
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  Join us April 13 through the sixteenth.
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  For the agenda and event details, 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
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  from the Becker's Healthcare podcast.
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  We're thrilled today to be joined by editor
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  in chief Allan Condon.
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  Allan's a brilliant journalist and a great leader.
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  Allan joins us regularly to talk about what
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  are the couple of the stories that he's
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  watching in health care. Allan, let me tee
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  it up and ask you to take it
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  away. What are a couple of the stories
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  you're watching currently in in health care? Yeah.
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  Absolutely. Great to be back, with you, Scott,
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  today after the the long weekend of Presidents'
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  Day. So catching up on a lot of
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  news this week. And I think, first and
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  foremost, just to kinda kick things off with
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  a really big transaction we've been following for
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  a number of months.
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  Just got over the line, and that is
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  Prime Healthcare
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  with another acquisition sealed in the books. That's
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  Prime Healthcare's nonprofit arm, Prime Healthcare Foundation,
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  just completed its acquisition
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  of Central Maine Healthcare.
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  So that's a a three hospital system in
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  Maine that includes a cancer center, a heart
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  institute,
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  more than 40 different physician practices.
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  It's an interesting deal given the prime
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  headquartered in California. This deal is the complete
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  opposite side of the state. It's a market
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  where it's just entered now. So we look
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  at what happened last year with Prime entering
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  Illinois for the first time with a nine
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  hospital acquisition from Ascension.
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  Now it's answered it's entered its 15 states,
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  with the acquisition of this tree hospital health
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  system in Maine,
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  investing about 150,000,000
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  into the system over the next few years,
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  improved facilities, services, infrastructure.
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  So I think with that acquisition, Prime is
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  now a 54
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  hospital
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  health system
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  now operating in 15 different states across the
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  country,
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  and certainly no signs of slowing down either.
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  There are couple of acquisitions that it's also,
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  looking at this year as well. So one
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  one one big acquisition just got over the
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  line to kick off,
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  February
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  as we get back here. I mean, that's
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  literally remarkable what Prime Healthcare has done, and
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  and it seems like Maine
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  must not be an easy state to do
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  health care in.
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  What does that look like, and and why
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  did they sell to Prime?
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  What's, any
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  information there?
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  Yeah. Absolutely. I think
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  it's certainly an interesting deal. I think HCA
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  Healthcare has got a bit of a market
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  presence in Maine,
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  quite a rural state as well. I know
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  that the system had its own financial issues,
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  so we're certainly looking for
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  a large financial partner, a large health system
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  partner,
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  Brian, with a bit of a track record
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  in in turning around some of these, maybe
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  financially challenged hospitals. Health systems saw this as
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  a big opportunity for it to,
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  really hop into Maine with a with an
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  immediate presence.
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  Like I said, those three hospitals, significant physician
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  practices, cancer institute, heart institute.
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  It's kinda interesting. I think we're seeing
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  for arguably the first time ever a lot
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  more of these systems considering,
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  what you might call noncontiguous
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  transactions. So I e,
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  health systems entering a state that's not a
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  neighboring state, not an adjacent state.
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  Like I said, Prime certainly operates in many
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  different states. Our headquarter in California, but jumping
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  all the way over to the East Coast
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  for this transaction, jumped into the Midwest with
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  the Illinois Ascension Hospitals last year.
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  And it kind of aligns with,
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  I spoke recently with Prime Healthcare CFO,
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  Steve Aleman, a fantastic leader
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  who kinda gave me a little bit of
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  insight into Prime's m and a approach, their
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  road map, their playbook here. It's essentially looking
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  for not one, two hospital acquisitions,
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  but really looking for this, quote, unquote,
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  market cluster approach. So can we jump into
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  Illinois with a cluster of hospitals that immediately
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  gain a foothold, a footprint in this new
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  market?
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  Same same opportunity here at Maine. It's not
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  one or two isolated hospitals. It's three hospital
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  system,
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  number of physician practices, some great, cancer institute,
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  hearts institute like Benson. So a lot of
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  opportunity to grow after this market cluster approach.
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  So,
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  no doubt some some some big challenges in
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  operating in so many different and unique markets
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  across the state,
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  but certainly an interesting deal. I'd be looking
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  to keep our eyes peeled for any other
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  health systems who are looking at potentially taking
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  a leaf out of Prime's playbook here in
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  terms of these,
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  noncontiguous,
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  health care app m and a's.
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  Thank you very, very much. I think your
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  point on buying clusters of hospitals versus a
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  one off is so right on. Nobody wants
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  to own on one off independent hospital someplace
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  that's just a prescription for trouble and not
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  economies of scale and a lot more. Your
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  point is so right on.
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  And, Alan, what are the stories you're watching
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  currently?
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  Yeah. I think,
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  a number of big,
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  financial reports that we just covered last week
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  at the tail end of last week as
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  well. So just a quick kind of update
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  on some of those. I think,
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  Ascension,
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  one of the latest, big, big nonprofits to
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  report their their financial reports.
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  So for the fiscal second quarter, I e,
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  the the three months ending December 31,
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  Ascension continued to trim down its operating losses.
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  Kind of a negative 0.9%
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  operating margin, for that fiscal second quarter, but
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  that that is a big improvement on the
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  negative 2.2 margin it reported in the same
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  quarter
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  last year. So continuing to really trim down
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  its operating losses,
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  move its operating margins back up to that
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  breakeven point,
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  continue to move in the right direction there.
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  And I think the results from Ascension really
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  show
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  financial stabilization
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  certainly. It spent the last couple of years,
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  as we know, Scott,
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  reshaping its portfolio, its operating model through a
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  number of
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  strategic divestitures,
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  some market exits,
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  hasn't acquired a hospital or anything in quite
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  some time, but we do know,
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  this quarter or indeed the start of next,
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  it is
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  expected to acquire,
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  which we've talked about on the podcast before,
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  huge, huge ASC chain operator. So, certainly,
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  getting its finances back on track in a
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  way to really take on this big $3,900,000,000
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  acquisition, give it an immediate significant
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  massive foothold in the ambulatory surgery center space
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  as well. So I think just looking at
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  Ascension's portfolio, if we take a trip back
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  three, four years ago, Ascension,
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  operated about a 140 acute care hospitals across
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  multiple states.
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  Now as you look at the February 2025,
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  it owns 90,
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  wholly owned or consolidated hops hospitals. So, you
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  know, trimmed its hospital portfolio by about forty,
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  fifty hospitals over the last few years,
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  certainly taking a big, big jump into the
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  ambulatory surgery center space,
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  and and certainly getting its finances back on
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  track after a period of financial instability and
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  some challenges there.
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  No. Fantastic. And and I also saw that
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  you referenced today,
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  common spirit health having a solid quarter to
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  another one of the large, large health systems.
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  Yes. Yeah. Yes. Absolutely. So I think common
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  spirit, reported just after Ascension as well. So
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  I think,
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  interested to look at at those two systems
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  together, Ascension and CommonSpirit.
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  CommonSpirit recorded a, I believe, a breakeven 0%
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  margin for the same quarter. That's the the
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  three months ended December 31.
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  But I think that's down that's dropped down
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  from a 1.3%
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  margin the same period last year. So a
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  little bit of a a fall in terms
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  of its margin there. I think labor costs
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  have been increasing for for common spirits, supplies,
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  whatnot. Yes. No doubt revenue is on the
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  rise, but I think hasn't been offset by
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  some of the pay the challenges it's seeing
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  on the payer side of things, also in
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  terms of the labor,
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  labor cost standpoint as well.
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  CommonSpirit under the new leadership of of CFO,
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  Michael Browning, who recently joined from OhioHealth,
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  really kinda taking a hard look at
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  some of the overall operating models. Where does
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  CommonSpirit want to operate? Does it wanna exit
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  certain markets?
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  Not too dissimilarly in the way Ascension has
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  done over the last couple of years. Common
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  Spirit is now looking at selling seven hospitals
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  in a couple different states, Ohio,
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  North Dakota.
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  It looks like taking a similar page of
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  the essential playbook as it looks to exit
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  some some particular markets to the right buyers,
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  of course.
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  In addition to that,
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  CommonSpirit is also exiting its joint venture with
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  Tennis. That's the Conifer Health Solutions joint venture.
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  Common Spirit is a 20 around about a
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  20% minority
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  stake, interest in the Conifer Health, revenue cycle
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  management firm. Tennis with this deal about about
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  a $1,900,000,000
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  deal to acquire one hundred percent of the
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  of the revenue cycle company back under its
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  management. So
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  a lot of, a lot of interesting deals
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  going on at CommonSpirit as well over the
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  next few months,
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  working a lot on AI, being being more
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  efficient in certain areas. Revenue cycle is a
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  key area that we've noted from recent investor
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  calls. So certainly
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  certainly a lot of work to do according
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  to CEO and CFO there, but be certainly,
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  paying paying close attention to comms period over
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  next coming quarters as they look to turn
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  that quarter and and, potentially exit some some
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  key markets as well.
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  No. Fantastic. And I did see that for
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  the quarter, comms period at 10 and a
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  half billion dollars in revenues
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  puts them on pace to be about 40,000,000,000
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  a year system, which is just humongous,
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  for the not for profit health care sector.
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  So fascinating.
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  Alan, as always, fantastic to visit with you
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  on the Becker's Healthcare podcast. You do just
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  a tremendous job. Thank you for joining us
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  today on the Becker's Healthcare podcast.
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  Always a pleasure. Thanks so much, Scott.