Details on the acquisition have emerged after the two sides inked a definitive agreement.
The terms of General Catalyst’s purchase of Summa Health have finally been revealed.
The venture capital firm’s Health Assurance Transformation Corporation (HATCo) signed a definitive agreement to acquire the Ohio-based hospital operator for $485 million, the organizations announced, with the details outlining the conditions of the transaction.
General Catalyst first shared its plans to scoop up a health system to be a proving ground for new technology around a year ago at the HLTH conference. It then selected Summa in January, with HATCo CEO Marc Harrison saying the nonprofit’s size and status as an integrated delivery system made it the right fit for transformation.
In acquiring Summa for $485 million, HATCo will allow the system to wipe out its existing debt of $850 million when combined with its current cash, according to the announcement. The remaining cash will go towards funding a separately governed community foundation to support investment for community health in greater Akron region.
HATCo is also committing $350 million in capital funding over the first five years for routine purposes and investment in technologies, along with $200 million over the first seven years for strategic and transformative investments.
The injection of capital will be beneficial for Summa, which experienced an operating loss of $37 million for the first nine months of 2023 after suffering an operating loss of $39 million in 2022.
“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. Our goals are to expand access to care and improve the experience for our patients, providers and staff,” Summa president and CEO Cliff Deveny said in a statement. “This is only the beginning of our long-term journey together.”
Summa will need to transition from a nonprofit to a for-profit provider, potentially creating a regulatory hurdle. However, Harrison and Deveny said earlier this year that they don’t anticipate regulatory scrutiny being a “huge issue” as they worked with the Ohio Attorney General’s office and the Ohio Department of Insurance.
In the announcement of the definitive agreement, the organizations said they are submitting applications to authorities like the Ohio Attorney General, the Ohio Department of Insurance, and Federal Trade Commission to comply with the regulatory review process.
Jay Asser is the CEO editor for HealthLeaders.
KEY TAKEAWAYS
General Catalyst’s HATCo has agreed to buy Ohio-based Summa Health for $485 million, enabling the health system to pay off its $850 million in existing debt.
HATCo is committing $350 million in its first five years of ownership to improve technologies, while pledging an additional $200 million over the first seven years for strategic investments.
The transaction is subject to regulatory approval and could be tripped up by Summa transitioning from a nonprofit to a for-profit entity, but the organizations have worked with the Ohio Attorney General and the Ohio Department of Insurance to facilitate the deal.