AKRON, Ohio - The for-profit General Catalyst's Health Assurance Transformation LLC will pay $485 million to acquire Akron's Summa Health, the two organizations said Thursday in releasing new details for the deal originally announced earlier this year.
The pending sale of Summa to Health Assurance was first announced in January, but the purchase price was not released at that time. The purchase price, when added to Summa's current cash, will enable the health system to eliminate $850 million in existing debt, the companies said in a joint news release.
The companies also said Thursday they have signed a definitive agreement outlining the transaction, which will make Summa part of Health Assurance.
The remaining cash, after closing adjustments, will fund a new, separately governed community foundation to benefit community health in Greater Akron, the companies said.
Health Assurance has also committed to $350 million in capital funding within the first five years for investment in technologies that support growth, as well as $200 million intended for strategic and transformative investments and to drive innovation over the first seven years.
The amount of money expected to be left over for the foundation was not specified, nor was a date for when the sale will be completed.
The deal is subject to regulatory approval.
"While true transformation will take time, the organizations have begun to collaborate on a transformation plan, which includes the creation of working groups with representation across Summa Health to identify and map out the many opportunities ahead," the news release said.
In January, Summa and Health Assurance signed a non-binding letter of intent outlining Health Assurance Transformation's planned acquisition of Summa Health.
Akron-based Summa Health is to become a wholly owned subsidiary of Health Assurance Transformation Corp., a new business venture owned by venture capital firm General Catalyst, the health system announced at the start of the year.
Private equity acquisitions of hospitals have been criticized for cutting costs to make a profit, at the expense of patient care.
Private equity takeovers of hospitals come at a time when health tech startups that did well during the COVID-19 pandemic now struggle to find customers, according to industry news reports.
The proposed transaction between Summa Health and Health Assurance "is focused on stabilizing the health system and creating a more proactive, affordable and equitable system of community-based, lifelong healthcare," the two companies said in a joint news release.
"As part of HATCo, Summa Health will be better positioned to build upon our existing strengths and capabilities while also benefiting from new opportunities and technology," Summa Health CEO Dr. Cliff Deveny said. "Our goals are to expand access to care and improve the experience for our patients, providers and staff. This is only the beginning of our long-term journey together."
When the proposed deal was first announced, Deveny said the infusion of cash would help Summa concentrate on medical care by retiring $800 million in debt. Without the acquisition by Health Assurance, the health system felt that its financial problems might have led to tough choices, Deveny said at the time.
Private equity firms are buying health care companies in record numbers.
Investments in health care grew from less than $5 billion in 2000 to more than $120 billion in 2019, according to work done by Eileen Appelbaum, co-director of the Center for Economic Policy and Research, and Cornell University professor Rosemary Batt.
Private equity owned hospitals now account for approximately 1-in-5 for-profit hospitals in the United States, Appelbaum said in a recent article.
Sen. Edward J. Markey, D-Massachusetts, chair of the Health, Education, Labor, and Pensions Subcommittee on Primary Health and Retirement Security, introduced this year the Health Over Wealth Act, which would require greater transparency for private equity firms and for-profit companies that own hospitals; and safeguard workers, patients, and health care quality.
The Markey report, issued in conjunction with the proposed bill, charged that Steward Health Care, Cerberus Capital Management and Medical Properties Trust "gutted dozens of hospitals across the United States in order to extract maximum profit."
Steward Health Care is not acquiring SummaHealth, but Markey's report highlights the downsides of private equity takeovers in general.
The Markey report looked at data from the Centers for Medicare and Medicaid Services, the nonpartisan think tank Lown Institute, reports from health workers, bankruptcy documents, and other public reporting.
"The lesson from Steward Health Care is clear: we need permanent guardrails against corporate greed in health care," the congressional report said. "Otherwise, for profit forces will continue to place their wealth over the public's health, risking patient lives and worker livelihoods."
When hospitals were faced with additional debt and financial insecurity due to Steward's decisions. Steward filed for Chapter 11 bankruptcy protection on May 6 and announced its intent to sell all of its 31 U.S. hospitals, according to the congressional report.
Two Steward-owned hospitals located in Massachusetts have closed, the congressional report said. Pg4