The leaders of the venture share their plan for transformation in an exclusive interview with HealthLeaders.
Summa Health CEO Cliff Deveny and HATCo CEO Marc Harrison hear the critics and the skepticism directed their way.
After General Catalyst announced its plan to buy the Ohio-based nonprofit integrated delivery system earlier this month, industry reaction to the venture capital firm diving into the deep end with its own health system has been mixed. Deveny and Harrison understand the noise yet are unwavering in their vision's ability to be transformative, the duo tells HealthLeaders.
Firstly, Harrison rejects the premise that the acquisition is a private equity or venture capital (VC) deal. General Catalyst is behind the transaction, but it's through its business spinoff HATCo, which Harrison characterizes as an independent company. That means the commitment timeline won't be akin to typical VC involvement.
"This is a long-term investment done outside of fund structures without the same expectations," Harrison says.
Whether that holds true is yet to be seen. In the meantime, Deveny and Harrison want the skeptics to answer their question: What's your answer to the challenges plaguing healthcare?
"We can't keep merging inefficient health systems into other health systems because then the problems just get compounded," Deveny says.
General Catalyst and HATCo were fairly quick in making good on their promise of buying a health system, landing on Summa merely three months after revealing their plan.
To Harrison, it was the right fit at the right time. Summa checked the boxes with its size at 1,300 beds and 1,000 physicians, as well as with its status as an integrated delivery system and the largest provider in its market. Perhaps most importantly, Summa is "ready for transformation," Harrison says.
That readiness partly stems from necessity. Summa has been looking for ways to steady its recent financial instability, which has seen it record an operating loss of $37 million for the first nine months of 2023, following an operating loss of $39 million in 2022. Merging with another system was explored as an option, but Deveny states that it would have, in most cases, led to prices for care going up.
"We felt like we really couldn't just keep doing the same thing of trying to look for ways to cut costs and we weren't generating enough capital to really build the ability to grow at a point that we wanted to," Deveny says. "So this gave us the opportunity to, in some sense, leap forward with a lot of technological opportunities that we had put off."
Summa has been implementing incremental changes and updates to its technology, but still felt like it wanted to go further to meet the needs of people who wanted access to the system. Partnering with HATCo solved the issue of lack of capital and resources.
"It's just getting that extra Miracle-Gro on top of all these great ideas," Deveny says.
'Not a laboratory, but a proof of concept'
How those ideas are executed could ultimately determine whether the partnership is successful.
Conceptually, Summa will allow HATCo to test new technology without the usual restrictions and roadblocks that traditional providers face. However, Harrison is clear that this doesn't make Summa a sandbox where constant trial and error will take place.
"This is not a test bed for extremely immature technologies," he says. "Cliff wouldn't allow us to put a brand new company in here that could potentially have a negative impact on patient care. So we have a real bias towards companies with proven solutions. This is not a laboratory, it's a proof of concept for what we think is the model for the future.
"This is thoughtful. It's intentional. It is open-minded, but I'd say this is bold, it's not risky because Summa is such a good system."
While the function of the technology will be to improve quality and access to care, both Deveny and Harrison recognize that success will still be measured by improved financial outcomes. "Obviously we'd like to see financially that we're doing better than we have been in the last few years and get back to where we were at pre-COVID," says Deveny, who also points to employee retention, growth in Summa's health insurance plan, and education expansion as objectives.
Of course, everything hinges on the deal passing regulatory review, which is no small matter in this case, considering Summa will transition from a nonprofit to a for-profit operator. Deveny and Harrison say they've been working with the Ohio Attorney General's office and the Ohio Department of Insurance, with their commitment to charity care and participation in federal programs like Medicaid and Medicare well received by many government officials. As such, the leaders are not seeing regulatory scrutiny as a "huge issue."
If the acquisition passes, HATCo and Summa have a long road ahead of them to prove the naysayers wrong. History is not on their side and while this undertaking may not have a true precedent, the road to transformative healthcare is paved with new, but failed, ideas.
Harrison and Deveny are ready to change that.
"I really believe that the iterative, thoughtful approach is going to result in a different way of delivering care and because the other people who are running other systems are good folks, they will both by necessity and out of choice adopt some of the lessons learned from us," Harrison says.
"That would be a great legacy for Cliff and me."
Jay Asser is the contributing editor for strategy at HealthLeaders.
The purchase of Summa Health by General Catalyst's HATCo sent shockwaves through the healthcare industry and was met with both cynicism and intrigue.
Speaking with HealthLeaders, HATCo CEO Marc Harrison and Summa Health CEO Cliff Deveny pushed back on doubters while shedding light on what they hope to accomplish and how.
The pair revealed why Summa was chosen, what the approach to testing new technology will be, and what will constitute success for them.