Hospitals and health systems in multiple states caught up in midsummer spate of M&A activity

Last week brought a flurry of merger-and-acquisition activity. In Pennsylvania, two health systems combined, and CHS sold three of its hospitals to a new organization. Ascension agreed to sell several of its hospitals in the Chicago area. Other transactions involved providers in Tennessee and Virginia. And there was more news on Steward’s hospitals in Massachusetts.

Here are the details.

Philadelphia-based?Jefferson Health?officially combined with?Lehigh Valley Health Network (LVHN), forming an integrated academic health care delivery system with 32 hospitals, more than 700 sites of care, more than 65,000 employees, a doctoral research university, and an expanded health plan.?

The two organizations signed a letter of intent to combine in December and completed the transaction on Aug. 1. The combined entity is among the top 15 not-for-profit health systems in the U.S., according to the?news release. It serves patients in eastern Pennsylvania and southern New Jersey.?

Jefferson Health’s CEO, Dr. Joseph Cacchione, is CEO of the newly combined health system. Dr. Brian Nester, who served as CEO of LVHN, is now executive vice president/chief operating officer of the combined system and has oversight of the legacy LVHN. Dr. Baligh Yehia is president of the legacy Jefferson Health and executive vice president/chief transformation officer of the combined entity.?

St. Louis-based?Ascension?entered into an asset purchase agreement to sell nine of its hospitals in Illinois, as well as four associated sites of care, to Ontario, Calif.-based Prime Healthcare. Ascension would still have 12 hospitals and care facilities in Illinois, a spokesperson told Healthcare Dive.

Prime Healthcare?has committed to investing $250 million to upgrade and improve the facilities as part of the agreement, according to the?announcement. If the transaction is finalized, it will be Prime Healthcare’s largest acquisition to date.?

Currently, Prime Healthcare has 44 hospitals, more than 300 outpatient locations, and nearly 45,000 employees and affiliated physicians across 14 states. The health system also has a 501(c)(3) charity, Prime Healthcare Foundation.?

Ascension and Prime Healthcare anticipate completing the transaction in the first quarter of next year if they receive regulatory approval. Under the agreement, eight of the hospitals would become for-profit entities, according to the Chicago Sun-Times. Ascension St. Francis in Evanston would remain a nonprofit as part of PrimeHealthcare Foundation. ?

Subsidiaries of Franklin, Tenn.-based,?Community Health Systems?entered into a definitive agreement on July 31 to sell CHS’ remaining three hospitals in Pennsylvania, along with the hospitals’ affiliated facilities and a physician network — collectively known as Commonwealth Health — to?WoodBridge Healthcare?for $120 million.?

WoodBridge Healthcare is a recently established not-for-profit organization based in New Hope, Pa. CHS is a for-profit health system. Woodbridge said Commonwealth Health will revert to its original nonprofit status when the purchase is completed, PA Homepage reported. The sale is expected to close in the fourth quarter, according to the?news release.?

On Aug. 1, CHS subsidiaries?completed?the sale of a Tennessee hospital — Tennova Healthcare-Cleveland — and the hospital’s related businesses to Dalton, Ga.-based?Vitruvian Health?for $160 million. Vitruvian Health was previously named Hamilton Healthcare System.?

CHS subsidiaries still own or lease 70 affiliated hospitals and operate more than 1,000 sites of care. On a July 25 earnings call, CHS executives reaffirmed the plan revealed in February to divest $1 billion worth of assets this year. Proceeds will be used to pay down CHS’ debts.

A decade ago, CHS was the largest for-profit hospital company in the U.S., with more than 200 hospitals.?

Charlottesville, Va.-based?UVA Health?completed its acquisition of Piedmont Family Practice, a family medicine clinic based in Warrenton, Va., on July 31.? The practice has about 90 team members, who have transitioned to UVA Health’s community medical group, according to the?announcement.?

Dallas-based?Steward Health?will be allowed to close two of the eight hospitals it operates in Massachusetts — Carney Hospital in Boston and Nashoba Valley Medical Center in Ayer — by the end of this month.?

U.S. Bankruptcy Judge Christopher Lopez, who is overseeing Steward’s bankruptcy case, said in a hearing on July 31 that, based on the evidence he had seen, keeping the hospitals open “threatens the entire hospital system in Massachusetts.”?

The judge noted that Steward is experiencing “an incredible amount of loss” weekly and has not secured funding that would keep its assets afloat much longer, Becker’s Hospital Review reported.?

Although Steward has been seeking buyers for the Massachusetts hospitals, neither of the two slated for closure has received an actionable bid, Steward representative David Cohen said during the hearing. An attorney for the commonwealth told the judge that state officials had been preparing for the potential closures and would work with Steward to relocate the hospitals’ patients “into safe facilities.”

Massachusetts Gov. Maura Healy’s administration offered $30 million in advance Medicaid payments to help Stewards’ hospitals in the state stay open through the end of this month, according to Becker’s, but the offer is contingent on Steward signing sales agreements for the rest of its hospitals.?

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What else you need to know

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Google will not renew its enterprise agreement with Amazon’s One Medical when the contract expires in December. In addition to offering its employees discounted or free memberships to One Medical, Google has had One Medical care centers in some of its offices. Google began transitioning those care centers earlier this year to Premise Health, a direct-to-employer, private equity-owned health care company based in Brentwood, Tenn., and is adding new on-campus centers with Premise, Healthcare Dive reported. One Medical will continue to be an in-network provider for Google employees after the agreement ends, but they will have to pay for their One Medical membership. Premise has approximately 800 care centers, compared with One Medical’s 208 centers, according to Healthcare Dive, and Premise offers a broader range of services.

Google’s parent company, Alphabet, invested in One Medical before the health care startup went public in 2020. Google signed a services agreement with One Medical in 2017, and by 2020, Google’s business accounted for 10% of One Medical’s net revenue. One Medical stopped publicly reporting its financial results after Amazon acquired the company for $3.9 billion early last year.?

Walmart is opening 25 autoimmune specialty pharmacies across five states, which will bring the retailer’s total number of?Specialty Pharmacies of the Communityto 31. The first six, which are located in Louisiana, New York, Rhode Island, and Texas, debuted in October, according to a LinkedIn?post?by Walmart’s senior vice president of pharmacy, Kevin Host. The new pharmacies will be in Alabama, Idaho, Oregon, Pennsylvania, and Wisconsin. Host said the SPOCs include clinical programs, pharmacy services provided by pharmacists with training in autoimmune diseases, enhanced care coordination, nutrition counseling, and emotional support services.?

Boehringer Ingelheim will pay up to $1.3 billion for Nerio Therapeutics, a La Jolla, Calif.-based oncology biotech firm. The small molecules in Nerio’s preclinical program inhibit the protein tyrosine phosphatases N1 and N2, which act as immune checkpoints; PTPN1/N2 inhibition can activate the immune system to fight cancer cells, Boehringer explained in a?press release. The German drugmaker said Nerio’s PTPN1/N2 inhibitors have the potential to act as monotherapies and in combination with cancer therapies in Boehringer’s pipeline. Terms of the acquisition were not disclosed.?

Ochsner Health signed an agreement to implement DeepScribe’s ambient AI?clinical documentation technology throughout the New Orleans-based health system, which has an estimated 4,700 employed and affiliated physicians. Approximately 50 providers in primary care and eight medical subspecialties at Ochsner have been using DeepScribe’s ambient AI in a pilot program initiated earlier this year. “DeepScribe’s Customization Studio and deep Epic integration have allowed us to deploy ambient AI with specialty-specific workflows that accommodate physician preferences while aligning with Ochsner-specific requirements. The result is consistently high-quality notes and high clinician adoption,” said Dr. Jason Hill, Ochsner’s innovation officer. The initial launch of the technology saw a 75% clinician adoption rate, DeepScribe noted in a?press release.

Humana could lose “a few hundred thousand members” as the insurer exits?a set of unprofitable Medicare Advantage plans for the upcoming plan year, senior executives estimated on an?earnings call?Thursday, though Chief Financial Officer Susan Diamond noted that some of those members are likely to choose another available Humana plan. CEO Jim Rechtin said the company is working on reducing benefits and changing its pricing to recover profitability in a separate set of plans that are either marginally profitable or marginally unprofitable, and that there are “very few” markets the company will fully exit. Diamond said the company has not completed the bid process for 2025 and therefore could not yet provide additional details.?

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What we’re reading

Hospital Assets Before and After Private Equity Acquisition?Hospital Assets Before and After Private Equity Acquisition . JAMA, 7.30.24? ?

Here's why hospital deals are heating up . Modern Healthcare, 8.2.24 (subscription required)

Building a business out of data . McKinsey & Co., 7.30.24 (infographic)