Latest / Becker’s Healthcare Podcast / Healthcare Transactions and the Financial Pressures Driving Them with Laura Dyrda

Transcript

Healthcare Transactions and the Financial Pressures Driving Them with Laura Dyrda · Becker’s Healthcare Podcast

• 0:02
  Every year, Becker's annual meeting brings health care
• 0:04
  leaders together to unpack the most pressing issues
• 0:07
  facing the industry.
• 0:08
  And every year, those conversations shift in profound
• 0:11
  and unexpected ways.
• 0:13
  This April, more than 3,500
• 0:15
  healthcare executives will return to Chicago for Becker's
• 0:18
  sixteenth annual meeting.
• 0:20
  Seven ninety five elite speakers will offer new
• 0:23
  lessons, new case studies, and predictions about what
• 0:26
  comes next. Join us April 13 through the
• 0:29
  sixteenth.
• 0:30
  For the agenda and event details,
• 0:32
  visit beckershospitalview.com
• 0:34
  and click on the events tab in the
• 0:36
  upper right.
• 0:38
  Hello, and welcome to the Becker Self Care
• 0:40
  podcast. My name is Chanel Banger. Today, I'm
• 0:42
  excited to speak with Laura Dirda,
• 0:44
  vice president and editor in chief at Becker's
• 0:46
  Healthcare, who joins us regularly to share insights
• 0:49
  in the health care trend she's keeping an
• 0:51
  eye on. Laura, thank you as always for
• 0:53
  joining me today. Why don't you take it
• 0:55
  away and tell us about some of the
• 0:56
  things you're seeing out there?
• 0:57
  Thanks so much, Chanel. Absolutely. So one of
• 1:00
  the big things that we've been keeping our
• 1:01
  eye on closely over the last six months
• 1:03
  or so is really just some of the
• 1:05
  transaction activity within the health care space and
• 1:08
  trying to figure out what that signals in
• 1:10
  in terms of the future financial health of
• 1:12
  hospitals, systems, and more. So recently, we've seen
• 1:15
  a couple of big health systems really,
• 1:18
  sign definitive agreements or or make plans to
• 1:21
  sell hospitals to more regional based systems or
• 1:24
  smaller organizations
• 1:25
  within the local space, which has been fascinating
• 1:27
  to see.
• 1:28
  One recent example was Providence,
• 1:31
  a large 51 hospital system
• 1:33
  announced plans to work with California based North
• 1:36
  Bay Health to offload
• 1:37
  a 198
• 1:38
  bed hospital in Napa.
• 1:40
  North Bay signed a letter of intent to
• 1:42
  acquire the hospital, which would bring its network
• 1:44
  to three hospitals overall, and the transaction is
• 1:47
  set to close by the 2026
• 1:49
  pending regulatory approvals.
• 1:51
  I know, North Bay is a hospital that,
• 1:54
  we've really in system we've worked with in
• 1:56
  the past that really has a lot of
• 1:57
  ambitions and and does a lot of great
• 1:58
  things for the community. And so it makes
• 2:01
  sense to see them, making a move to
• 2:03
  bring in
• 2:04
  the local hospitals within their space. And so,
• 2:07
  that's very interesting to see. In another deal,
• 2:09
  Community Health Systems signed a definitive agreement to
• 2:12
  sell four hospitals to Freeman Health System for
• 2:14
  a $112,000,000
• 2:16
  in Arkansas.
• 2:17
  Freeman, will double its footprint with the transaction,
• 2:20
  which is expected to close within the second
• 2:22
  quarter of the year. And then finally, CommonSpirit
• 2:25
  Health sold a critical access hospital to North
• 2:28
  Dakota
• 2:29
  system, Altru, which is in the process of
• 2:32
  acquiring three other hospitals from CommonSpirit as well.
• 2:35
  And, you know, when we look at the
• 2:37
  financial
• 2:38
  space for all of these health systems, it's
• 2:40
  really interesting to kind of see,
• 2:42
  where they're at. CommonSpirit
• 2:44
  reported an operating loss of a $165,000,000
• 2:48
  during its first quarter of the fiscal year
• 2:50
  reported in the last November
• 2:52
  and a margin of negative 1.6%,
• 2:54
  which was down from 2.1%
• 2:55
  margin in the same period of the previous
• 2:57
  year.
• 2:58
  The health system also reported strong salary cost
• 3:01
  management,
• 3:02
  length of stay improvements, and higher productivity, but
• 3:05
  cited expenses still growing
• 3:07
  faster than revenue as a significant impact from
• 3:09
  payer denials and slow payments
• 3:12
  as the reason for some of its financial
• 3:13
  challenges. So, you know, we're seeing,
• 3:16
  some of these movements because of,
• 3:18
  that challenge at the health system level. Now
• 3:21
  Providence is in a little bit of a
• 3:23
  different position. Providence reported $21,000,000
• 3:25
  operating gain
• 3:27
  up over $208,000,000
• 3:29
  loss last year for the third quarter,
• 3:31
  which is most recent financial report back in
• 3:33
  November.
• 3:34
  The system did report supply expenses were up
• 3:37
  8% year over year, and pharmacy expenses were
• 3:39
  up 12% indicating similar expense growth,
• 3:43
  which is definitely challenging for health systems as
• 3:45
  they're looking to try to figure out what's
• 3:47
  gonna be next and how they can most
• 3:49
  efficiently and effectively manage their budgets.
• 3:51
  On the flip side, CHS has started
• 3:54
  offloading hospitals last year, but it really put
• 3:57
  itself in a different position than the other
• 3:59
  two. CHS reported
• 4:01
  $1,500,000,000
• 4:02
  on a 11.9%
• 4:04
  margin
• 4:05
  for the year end in 2025,
• 4:07
  really driven by the hospital divestiture gains and
• 4:10
  then continue, as we see here, to make
• 4:12
  some of those moves. And so it seems
• 4:14
  like these portfolios of large systems are really
• 4:17
  taking a look at what they can do
• 4:18
  well and,
• 4:20
  figuring out what makes more sense
• 4:22
  to offload from their systems and and really
• 4:25
  have other local systems take on, some of
• 4:28
  those operations and,
• 4:30
  really, you know, look at what they can
• 4:32
  do with those hospitals. And so that was
• 4:34
  one thing that we have been following closely,
• 4:35
  and we'll continue to talk about these trends
• 4:38
  heading into the rest of the year. We'll
• 4:39
  have our annual meeting in April where mergers,
• 4:42
  acquisitions,
• 4:43
  financial health of hospitals and systems, and what
• 4:45
  could potentially happen ahead will be a central
• 4:47
  topic of conversation for us. And we'll be
• 4:50
  exciting to hear from leaders, CEOs, CFOs, and
• 4:53
  more across the spectrum how they're thinking about
• 4:55
  the next twelve months or so. And, you
• 4:58
  know, similarly, we're also seeing some really interesting
• 5:01
  acquisitions
• 5:02
  across the board that are nontraditional and more
• 5:05
  creative.
• 5:06
  So a recent,
• 5:07
  deal that we saw done, Pennsylvania based Universal
• 5:10
  Health Services
• 5:12
  is acquiring online behavioral health provider Talkspace in
• 5:14
  a deal valued at around $835,000,000
• 5:18
  Talkspace has a network of around 6,000 licensed
• 5:21
  behavioral health professionals serving 50 states, Washington DC,
• 5:25
  and Puerto Rico.
• 5:26
  It has services available for more than 200,000,000
• 5:29
  people through their health insurance plans, employee assistance
• 5:32
  programs, or as a benefit through employers, schools,
• 5:35
  or government agencies.
• 5:37
  Last year, the online therapy company reported a
• 5:39
  $229,000,000
• 5:41
  in revenue and provided more than 1,600,000
• 5:43
  patient sessions
• 5:45
  according,
• 5:46
  to
• 5:47
  the company in a news release.
• 5:49
  Now UHS president and CEO,
• 5:51
  Mark Miller, said the acquisition will allow the
• 5:54
  for profit health system to expand and access
• 5:56
  and offer more flexible
• 5:58
  step solutions to address the growing demand for
• 6:01
  behavioral health. And we're seeing that here at
• 6:03
  Becker's too.
• 6:04
  So many times, executives and leaders, when you
• 6:07
  ask them what one of their top concerns
• 6:09
  is, it's looking out and seeing the behavioral
• 6:11
  health needs of their communities, their patients, and
• 6:13
  trying to figure out how to extend capacity
• 6:16
  to meet all of those needs. If those
• 6:18
  needs go unmet, behavioral health patients often end
• 6:20
  up back in the emergency rooms or needing
• 6:22
  additional services
• 6:24
  at the hospital,
• 6:25
  which, are preventable
• 6:27
  and really add a good deal of cost
• 6:29
  to the system as well as,
• 6:31
  deteriorating health for people. And so I I
• 6:33
  think the communities and and hospitals and systems
• 6:36
  are really trying to find ways that they
• 6:38
  can dig deeper into the behavioral health space
• 6:40
  and make sure that they're caring for their
• 6:42
  communities overall.
• 6:43
  Mister Miller said that this acquisition really aligns
• 6:46
  with UHS' goals and and growth objectives
• 6:49
  to accelerate outpatient and telehealth behavioral health strategies
• 6:53
  as well as diversify the payer mix and
• 6:55
  deliver comprehensive technology enabled continuum of care.
• 6:59
  So we're really excited to see this type
• 7:01
  of
• 7:02
  partnerships and, you know, looking at some of
• 7:05
  the real solutions that can make a big
• 7:07
  difference for the health care ecosystem.
• 7:09
  The deal is still subject to approval by
• 7:12
  Talkspace shareholders,
• 7:13
  regulatory approvals,
• 7:15
  and customer closing conditions,
• 7:17
  but is expected to close in the 2026.
• 7:21
  Now we also have a behavioral health summit
• 7:23
  coming up in April as well as one
• 7:24
  in November that will continue to dig deeper
• 7:27
  into some of these themes and topics and,
• 7:29
  bringing together leaders from across the country,
• 7:32
  which is exciting to have that type of
• 7:34
  energy and decision makers in the room together
• 7:36
  looking at how they can be creative
• 7:39
  and thoughtful in their processes.
• 7:41
  Perfect. Well, Laura, I wanna thank you as
• 7:43
  always for joining me today and for sharing
• 7:45
  your insights on the Becker's Healthcare podcast.
• 7:47
  Can't wait to see you at the annual
• 7:48
  meeting in April. Thank you so much.