Latest / Becker’s Healthcare Podcast / The Rise of Health System Joint Ventures and New Deal Structures with Molly Gamble

Transcript

The Rise of Health System Joint Ventures and New Deal Structures with Molly Gamble · Becker’s Healthcare Podcast

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  - The strategic agenda facing hospital and health system
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  - Hello, and welcome to the Becker's Healthcare podcast.
• 1:00
  - My name is Chanel Banger, and today I'm
• 1:02
  - excited to speak with Molly Gamble, vice president
• 1:05
  - of editorial at Becker's Healthcare, who joins us
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  - regularly to share insights into health care trends
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  - she's keeping an eye on. Molly, thank you
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  - as always for joining me today. Why don't
• 1:13
  - you take it away and tell us about
• 1:15
  - some of the things that you're seeing out
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  - there?
• 1:17
  - Yeah. Thank you so much, Chanel. We reported
• 1:19
  - this week on two of the biggest nonprofit
• 1:21
  - systems in the country.
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  - Struck an interesting arrangement and an interesting deal.
• 1:25
  - They basically agreed to run eight hospitals together
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  - in a single city. So this is short
• 1:29
  - of a merger. It's not one by any
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  - other, just
• 1:32
  - in this case, sharing Denver.
• 1:34
  - This is AdventHealth and Intermountain. On July 21,
• 1:37
  - they signed a letter of intent to form
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  - a joint venture in the Denver Metro Area.
• 1:41
  - That would include eight hospitals combined. AdventHealth would
• 1:44
  - bring five, Intermountain would bring three, and AdventHealth
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  - would run daily operations here. So it's looking
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  - like it was to move pretty quickly, the
• 1:51
  - definitive agreement expected within weeks. And this is
• 1:54
  - poised to close in early twenty seven.
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  - On its face, it might seem like a
• 1:58
  - local story, but I wanted to bring it
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  - to the podcast today because I think it
• 2:01
  - has some shifts
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  - that we're starting to see more and more
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  - often in health system deal making around the
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  - country. You know, the first is structure here.
• 2:08
  - This is not a full merger, and I
• 2:10
  - would go so far to say with systems
• 2:12
  - this size, the full merger isn't the default
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  - move.
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  - Avent Health and Intermountain, this joint venture keeps
• 2:18
  - both of their system identities intact.
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  - One of them will run this operation.
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  - The reason why is with the joint venture,
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  - you get the upside, you get scale in
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  - the market, you share the cost, you have
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  - a stronger position against the payers, but you're
• 2:31
  - also not fusing together your balance sheets and
• 2:33
  - your cultures forever, which as we've seen can
• 2:35
  - take years and years. And arrangements like this,
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  - you can also be selective. Intermountain is gonna
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  - be withholding its Saint Joseph Hospital out of
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  - the joint venture entirely. That's a a Catholic
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  - hospital that it will carve out of this
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  - JV
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  - with AdventHealth, and you can't do that when
• 2:52
  - you're have a full on merger. You can't
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  - fine tune like that. So joint ventures really
• 2:56
  - let systems draw the lines.
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  - This Denver structure, it's it's not unprecedented. It's
• 3:00
  - not coming out of nowhere. We've seen this
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  - more and more often Ascension did nearly the
• 3:04
  - same thing in Michigan back in 2024
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  - with eight of its hospitals and then joint
• 3:09
  - venture with Henry Ford that created a 13
• 3:11
  - hospital system with Henry Ford holding 80 majority
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  - ownership stake, Ascension 20%.
• 3:16
  - Some other cross market JVs worth naming, Kaiser
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  - and Renown
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  - used one to walk Kaiser up into Northern
• 3:22
  - Nevada where it had no presence before that.
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  - We've We've also seen some interesting ones in
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  - outpatient. Mass General Brigham out of Boston is
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  - using a JV to help Tampa General build
• 3:30
  - a cancer and outpatient network on Florida's East
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  - Coast.
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  - So you're seeing this more frequently. Different flavors
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  - of it in different pockets of the country
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  - and state boundaries, as I'm gonna get to
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  - in a moment, just don't really determine
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  - whether these JVs get off the ground.
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  - It's a less capital intensive way and faces
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  - some fewer, you know, fewer regulatory hurdles than
• 3:49
  - a full merger would. The geography piece is
• 3:51
  - an interesting one to me. This is something
• 3:53
  - that when I see different systems coming together,
• 3:56
  - the geography doesn't make it an arrangement that
• 3:58
  - you would exactly expect.
• 4:00
  - Denver itself is one market.
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  - So
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  - in this case, AdventHealth and inter Intermountain overlap
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  - a bit there, but AdventHealth is based in
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  - Florida, Intermountain headquartered in Utah, across six states.
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  - National players are really reaching into a shared
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  - market from opposite corners of the country,
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  - not just going to their neighbors necessarily
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  - and and striking these joint ventures.
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  - We're also seeing Sutter Health in the line.
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  - You know, this is and that's two other
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  - systems, very disparate geographies coming together, California, Minnesota,
• 4:30
  - and Wisconsin, markets that don't touch at all.
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  - In the past, one of the ways to
• 4:34
  - think about deal making with health systems was
• 4:36
  - to own your region.
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  - Now that's kind of changing to
• 4:40
  - put more emphasis on gaining capability wherever that
• 4:43
  - partner happens to be. And then finally, I
• 4:45
  - would say this JV illustrates a shift in
• 4:47
  - mindset.
• 4:48
  - These systems are not cornered. This is Intermountain
• 4:51
  - and AdventHealth. They are moving toward this from
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  - strength. Kaufman Hall had some second quarter results
• 4:56
  - and findings out
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  - in recent weeks about MNA, and they counted
• 5:00
  - 18 announced deals in the second quarter. That's
• 5:03
  - one of the highest totals since 2019,
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  - just as it is. But then if you
• 5:07
  - look more closely, two thirds of those were
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  - independent systems partnering from a position of strength
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  - versus distress.
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  - AdventHealth and Iman approves it both came out
• 5:15
  - of partnerships that have fallen apart. So this
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  - is kind of AdventHealth
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  - recreating what it had with common spirit with
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  - Centura, if if folks remember that. It was
• 5:24
  - unwound a couple years ago. It fractured in
• 5:26
  - 2023,
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  - and then Intermountain also lost Kaiser's business in
• 5:30
  - the same market. So this is two different
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  - systems coming together,
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  - after some fallout in the last three to
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  - four years.
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  - And it's still not the language of a
• 5:38
  - rescue, though. This is healthy systems that are
• 5:40
  - choosing each other and repositioning while they still
• 5:42
  - have the leverage to to do so.
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  - So, Chanel, this is one joint venture. It
• 5:47
  - is involving just
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  - eight hospitals, like I said. But I think
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  - if you unpack it and take a step
• 5:53
  - back from it, it probably symbolizes a lot
• 5:55
  - of the shifts that we're seeing more and
• 5:57
  - more often in health system deal making.
• 6:00
  - As a whole, deals are up. Probably the
• 6:03
  - most we've seen in the second quarter, at
• 6:04
  - least since 2019, like I said, so a
• 6:07
  - seven year high. And then even if you
• 6:10
  - drill down further,
• 6:11
  - the deals are taking different shapes. It's not
• 6:14
  - just straight M and a, it's also joint
• 6:16
  - ventures,
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  - affiliations, and a lot more deals with systems
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  - that are crossing state lines
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  - and, and not only with neighboring States, but
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  - again, like States that don't even touch each
• 6:25
  - other. So this cross market
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  - geography
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  - continues. So Chanel just wanted to bring that
• 6:29
  - to our listeners if they were on or
• 6:31
  - less familiar with this one particular deal. Again,
• 6:34
  - AdventHealth and Intermountain signing an LOI. This happened
• 6:37
  - July 21 to basically
• 6:39
  - own the market of Denver together, and we'll
• 6:42
  - continue to see how other deals in the
• 6:43
  - making take shape. We're we're watching too Align
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  - and Sutter Health, another interesting combination. So certainly
• 6:49
  - won't be the last of a a JV
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  - like this, Chanel, but one that I wanted
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  - to just raise and unpack a little in
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  - a bit more detail for our listeners.
• 6:56
  - Got it. Got it. Thank you so much
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  - for walking us through all that. Well, Molly,
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  - I wanna thank you as always for joining
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  - me today. I look forward to catching up
• 7:03
  - with you again next week. Thank you so
• 7:05
  - much. Thanks, Chanel.