By
Lydia Coutre | October 8, 2018
Healthcare industry observers say they wouldn't be surprised to
see Summa Health System, based in Akron, Ohio, attract interest from regional,
state and national players in its search for a partner.
Industry experts named University Hospitals, the University of Pittsburgh Medical Center (UPMC), Toledo-based ProMedica, Columbus-based OhioHealth and hospital giant HCA Healthcare as possible organizations to work with Summa, which launched its search for a partner at the start of this month.
Short of an outright sale for cash, pretty much all financial arrangements and structures are on the table for Summa as it looks for a partner health system to provide long-term financial stability, advance service offerings and support continued investment in the community's health.
As a wave of health care mergers and acquisitions sweeps the country (just last week, Cleveland Clinic announced it acquired a three-hospital health system and a separate medical center in Florida), news of Summa looking for a partner didn't come a surprise to some.
"Providers are able to enjoy several competitive advantages as a result of aligning with a partner," said Kathryn Hickner, a transactional health care attorney and a partner at Kohrman Jackson & Krantz in Cleveland. "For example, more progressive IT infrastructure, or economies of scale, better negotiating leverage, also stronger systems to bolster coordination of care, and to improve the quality and efficiency of services provided, those are often the reasons why providers align with one another. The bottom line is that providers align with others in order to better position themselves for success under the changing health care reimbursement and delivery regime."
Industry experts named University Hospitals, the University of Pittsburgh Medical Center (UPMC), Toledo-based ProMedica, Columbus-based OhioHealth and hospital giant HCA Healthcare as possible organizations to work with Summa, which launched its search for a partner at the start of this month.
Short of an outright sale for cash, pretty much all financial arrangements and structures are on the table for Summa as it looks for a partner health system to provide long-term financial stability, advance service offerings and support continued investment in the community's health.
As a wave of health care mergers and acquisitions sweeps the country (just last week, Cleveland Clinic announced it acquired a three-hospital health system and a separate medical center in Florida), news of Summa looking for a partner didn't come a surprise to some.
"Providers are able to enjoy several competitive advantages as a result of aligning with a partner," said Kathryn Hickner, a transactional health care attorney and a partner at Kohrman Jackson & Krantz in Cleveland. "For example, more progressive IT infrastructure, or economies of scale, better negotiating leverage, also stronger systems to bolster coordination of care, and to improve the quality and efficiency of services provided, those are often the reasons why providers align with one another. The bottom line is that providers align with others in order to better position themselves for success under the changing health care reimbursement and delivery regime."
University Hospitals
While University Hospitals declined to comment for this story,
industry observers have suggested that it could be a natural fit to partner
with Summa. The Clinic and UH have seemingly been in an arms race for years,
acquiring community hospitals throughout the region at a rapid pace. In 2015,
the Clinic acquired Summa's main Akron competitor, Akron General, and brought
it into its network.
"I guess the question would be would University Hospitals want to come into Summit County?" said Allan Baumgarten, a Minnesota-based health care consultant who studies, among others, the Ohio market. "It would in a sense be an extension of the rivalry that they have now in Cleveland between the Clinic and UH and extended into the Akron area. So given the fact that its main competitor has now sort of gained the halo or the prestige of the Cleveland Clinic, I'm thinking that if I was Summa, I would think that it can't just be anyone who comes in to take us over."
Tom Campanella, director of the health care MBA program at Baldwin Wallace University, said Summa would be a "logical" potential partner within the region. A key advantage Summa has is its insurance arm SummaCare, which could be a draw for University Hospitals, which several years ago sold off its insurance arm, Campanella said.
"In having a relationship with Summa, they would get access to, as part of that, SummaCare, which I think would be a gem … especially in this day where Medicare Advantage and other plans are becoming major sources of revenue for health care systems," he said.
"I guess the question would be would University Hospitals want to come into Summit County?" said Allan Baumgarten, a Minnesota-based health care consultant who studies, among others, the Ohio market. "It would in a sense be an extension of the rivalry that they have now in Cleveland between the Clinic and UH and extended into the Akron area. So given the fact that its main competitor has now sort of gained the halo or the prestige of the Cleveland Clinic, I'm thinking that if I was Summa, I would think that it can't just be anyone who comes in to take us over."
Tom Campanella, director of the health care MBA program at Baldwin Wallace University, said Summa would be a "logical" potential partner within the region. A key advantage Summa has is its insurance arm SummaCare, which could be a draw for University Hospitals, which several years ago sold off its insurance arm, Campanella said.
"In having a relationship with Summa, they would get access to, as part of that, SummaCare, which I think would be a gem … especially in this day where Medicare Advantage and other plans are becoming major sources of revenue for health care systems," he said.
UPMC
The University of Pittsburgh Medical Center also has a "very
strong insurance arm" in Western Pennsylvania, which could bring potential
synergy to a partnership with Summa and SummaCare, Campanella said.
Baumgarten also pointed to that overlap in assets. UPMC has been on an "acquisition tear," in recent years, moving well into Central Pennsylvania, "but maybe they see themselves as entering Ohio at some point in the future," he said.
Some sort of partnership between the two would create opportunities both on the provider side and the health plan side, Baumgarten said.
Moving into Akron would give UPMC a corridor from Pittsburgh to Akron, with Youngstown and Warren along that corridor, Campanella noted. "Plus UPMC has a children's hospital, which is a big plus," he said. "They've had, from what I've heard, some real strong balance sheets. And I would think that they would potentially want to look at expanding outside their geographic area."
Baumgarten also pointed to that overlap in assets. UPMC has been on an "acquisition tear," in recent years, moving well into Central Pennsylvania, "but maybe they see themselves as entering Ohio at some point in the future," he said.
Some sort of partnership between the two would create opportunities both on the provider side and the health plan side, Baumgarten said.
Moving into Akron would give UPMC a corridor from Pittsburgh to Akron, with Youngstown and Warren along that corridor, Campanella noted. "Plus UPMC has a children's hospital, which is a big plus," he said. "They've had, from what I've heard, some real strong balance sheets. And I would think that they would potentially want to look at expanding outside their geographic area."
Other Ohio systems
Campanella said he doesn't foresee OhioHealth or ProMedica
entering the area, "but the one thing I've learned in health care: You
never say never."
ProMedica, along with Welltower Inc., a provider of health care infrastructure, this summer announced the completed acquisition of Quality Care Properties, Inc. and its principal tenants, Arden Courts and HCR ManorCare, a network of short-term, post-hospital services and long-term care with several locations in Northeast Ohio.
Campanella said he doesn't know if that signals much of anything. ProMedica could just be working to penetrate the long-term care market in the area, "rather than using it as a way to sort of leapfrog into Cuyahoga County."
Baumgarten, on the other hand, noted that ProMedica, the dominant provider for much of Northwest Ohio, over the years acquired so many hospitals that the government eventually stepped in and forced the system to reverse a merger, Baumgarten said. With limits to its ability to add more Northwest Ohio hospitals, the system began adding facilities in Southeast Michigan, and Baumgarten wonders if that could mean ProMedica will turn its sights toward Northeast Ohio next.
Columbus-based OhioHealth has been moving north and east toward Cleveland, reaching as far as the Mansfield area, he said.
"OhioHealth keeps expanding its geographic footprint and might see an opportunity there to sort of break into Northeast Ohio in a big way with some kind of venture with Summa," Baumgarten said.
ProMedica, along with Welltower Inc., a provider of health care infrastructure, this summer announced the completed acquisition of Quality Care Properties, Inc. and its principal tenants, Arden Courts and HCR ManorCare, a network of short-term, post-hospital services and long-term care with several locations in Northeast Ohio.
Campanella said he doesn't know if that signals much of anything. ProMedica could just be working to penetrate the long-term care market in the area, "rather than using it as a way to sort of leapfrog into Cuyahoga County."
Baumgarten, on the other hand, noted that ProMedica, the dominant provider for much of Northwest Ohio, over the years acquired so many hospitals that the government eventually stepped in and forced the system to reverse a merger, Baumgarten said. With limits to its ability to add more Northwest Ohio hospitals, the system began adding facilities in Southeast Michigan, and Baumgarten wonders if that could mean ProMedica will turn its sights toward Northeast Ohio next.
Columbus-based OhioHealth has been moving north and east toward Cleveland, reaching as far as the Mansfield area, he said.
"OhioHealth keeps expanding its geographic footprint and might see an opportunity there to sort of break into Northeast Ohio in a big way with some kind of venture with Summa," Baumgarten said.
National systems
The range of possible partners also includes national, for-profit
entities, such as HCA Healthcare and Tenet Healthcare. Campanella noted that
Tenet typically focuses "a little bit more on some of the rural
areas," but noted that the big growth area for the for-profit health care
industry is in the outpatient arena.
"So to have or establish the collaborative relationship with an organization that has a real strong experience in the outpatient side from a number of different perspectives, I think would be a potential partner for Summa," he said.
As for HCA, Baumgarten noted there have been several examples of the organization going into a market and entering into 50/50 ventures with nonprofit health systems.
"HCA hasn't been looking in the Rust Belt, hasn't been looking much in the Northeast," he said. "Most of its recent acquisitions have been in states where it's already really strong, like Florida and Texas. But this is a company that's always looking for opportunities and they might see Northeast Ohio as an opportunity."
While Baumgarten and Campanella named several potential partners for Summa, neither had a strong sense of what the partnership will ultimately look like. Campanella said it's wise for Summa to stay open-minded and look at all forms of offers on the table.
"So to have or establish the collaborative relationship with an organization that has a real strong experience in the outpatient side from a number of different perspectives, I think would be a potential partner for Summa," he said.
As for HCA, Baumgarten noted there have been several examples of the organization going into a market and entering into 50/50 ventures with nonprofit health systems.
"HCA hasn't been looking in the Rust Belt, hasn't been looking much in the Northeast," he said. "Most of its recent acquisitions have been in states where it's already really strong, like Florida and Texas. But this is a company that's always looking for opportunities and they might see Northeast Ohio as an opportunity."
While Baumgarten and Campanella named several potential partners for Summa, neither had a strong sense of what the partnership will ultimately look like. Campanella said it's wise for Summa to stay open-minded and look at all forms of offers on the table.
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