The Hart-Scott-Rodino Act will be significantly amended for the first time in 46 years, requiring companies to provide more information.
The Federal Trade Commission (FTC) has finalized its rule altering the Hart-Scott-Rodino Act (HSR), putting more onus on merging parties.
The changes include requiring companies involved in M&A to disclose information about entities like private equity and minority holders that could influence decision-making post-merger, report vertical and non-horizontal business relationships, and inform the agency on acquisitions that closed with the last five years.
It marks the first time in 46 years that HSR has been overhauled after the program was passed in 1976.
The final rule, which was passed unanimously with a 5-0 vote by the commissioners, will take effect 90 days after it is published in the Federal Register, likely in January 2025.
“The new HSR Form marks a generational upgrade that will sharpen the antitrust agencies’ investigations and allow us to more effectively protect against mergers that may substantially lessen competition or tend to create a monopoly,” FTC Chair Lina Khan said in a statement.
The commission estimates the final rule will increase the time required to file an HSR filing by 68 hours on average and cost merger parties an additional $39,644 per filing on average. However, the commission said that it believes the costs will decline over time as companies get more familiar with the new requirements.
Alongside the changes to the final rule, the FTC stated it will resume its early termination of filings, which allow the agency to end the initial 30-day waiting period if it finds that the merging parties are complying with antitrust rules and don’t require enforcement.
Hospital mergers and acquisitions reached a seven-year high for third quarter activity, a new report finds.
One of the more measurable effects of the Steward Health Care bankruptcy on the industry is being seen in hospital dealmaking.
Steward hospitals were involved in 11 of the 27 M&A transactions in the third quarter, which was the most for a quarter this year and in line with pre-pandemic levels, according to a report by consulting firm Kaufman Hall.
The transaction volume also represented the most deals made from July through September since Q3 2017. When excluding the 11 Steward sales, the 16 remaining transactions are still around the same levels for Q3 in 2018 (18), 2020 (19), and 2023 (18).
In terms of total transacted revenue, the quarter brought in $13.3 billion, the highest figure Kaufman Hall has recorded for a Q3 over the past eight years. However, the sheer volume of deals brought down the average seller size from a historic $984 million in Q2 to $492 million in Q3, bringing it closer to recent year-end averages.
Four “mega mergers,” or deals in which the annual revenue of the seller or smaller party topped $1 billion, took place in the quarter. One of those featured Steward hospitals, with Health Care Systems of America acquiring eight facilities in Florida, Louisiana, and Texas.
The other three transactions that qualified were Orlando Health’s purchase of Alabama-based Brookwood Baptist Health from Tenet, Prime Healthcare’s acquisition of eight (and eventually nine) Ascension hospitals in Illinois, and the merger between Sanford Health and Marshfield Clinic.
Several of the deals completed in Q3, including many of the Steward sales, illustrate the impact market conditions have on completing transactions, Kaufman Hall stated. Whereas an acquisition like the one by Orlando Health represents an attractive asset going to a regional system eager for expansion, the sale of Prospect Medical Holdings’ Crozer Health to real estate firm CHA Partners highlights the difficulty of divesting in less favorable markets.
Other M&A trends continue to include portfolio realignment as larger systems exit unprofitable markets and refocus efforts in core regions, as well as systems expanding into new markets to widen their reach.
“While the increasing number of transactions in Q3 2024 is getting us back to a normal level of activity, we are observing various challenges and opportunities in the market,” Anu Singh, managing director and Mergers & Acquisitions practice leader for Kaufman Hall, said in a statement. “The motivations for entering into transactions and partnerships vary. As we are seeing the number of strategic transactions accelerate, we are also seeing some organizations that face financial challenges are struggling to find a partner.”
Investing in cybersecurity and being prepared is a must for CEOs wanting to avoid costly attacks.
Cybersecurity has become a major pain point for CEOs in 2024 as the number of incidents have gone up.
Ransomware attacks on healthcare organizations have hit a four-year high since 2021, with two-thirds of companies saying they were impacted in the past year, according to a survey by security solutions firm Sophos.
While ransomware attacks tracked by Sophos across all sectors dropped from 66% in 2023 to 59% in 2024, healthcare trended in the opposite direction as 67% of organizations reported being affected this year versus 60% in 2023. For comparison, only 34% of companies were hit by an attack in the firm’s 2021 report.
This year’s survey is based on responses from 402 healthcare organizations across 14 countries, conducted from January to February.
The findings also revealed that the recovery time for companies after suffering a ransomware attack is getting longer. Fully recovering in a week or less was only possible for 22% of respondents, which was a significant decline from 47% in 2023 and 54% in 2022. More than a third of organizations (37%) needed more than a month to recover, an increase from 28% in 2023.
“The highly sensitive nature of healthcare information and need for accessibility will always place a bullseye on the healthcare industry from cybercriminals,” John Shier, Sophos field chief technology officer, said in a statement. “Unfortunately, cybercriminals have learned that few healthcare organizations are prepared to respond to these attacks, demonstrated by increasingly longer recovery times.”
It's getting costlier for companies to be vulnerable to cyberattacks. Even excluding ransom payments, respondents reported a mean cost of $2.57 million to recover from a ransomware incident, nearly doubling the cost of $1.27 million from 2021. The mean cost has steadily climbed since then, hitting $1.85 million in 2022 and $2.2 million in 2023.
CEO perspective
With the pressure rising expenses are putting on bottom lines, CEOs can ill afford to be unprepared for a cyberattack.
Yet 37% of respondents working at healthcare organizations report not having a cybersecurity response plan in place, a recent survey by Software Advice found.
Preventative measures like having the right people with relevant knowledge and experience in positions to oversee security is necessary, but so is having a response plan to deal with the fallout of an attack.
New Cedars-Sinai CEO Peter Slavin recently highlighted why cybersecurity should be firmly on the radar of executives on the HealthLeaders Podcast.
“It's incumbent on all CEOs in healthcare and other industries to be vigilant on this front, to make sure that there are tons of people in place managing that vigilance on a day-to-day basis, and that function is appropriately resourced,” Slavin said. “All organizations just need to do their best to try to prevent such a catastrophe from happening.”
The Catholic nonprofit managed to slash its operating loss by nearly $400 million for fiscal year 2024.
CommonSpirit Health's finances are heading in the right direction, but continue to be inhibited by challenges with payers, the health system said in its fiscal year 2024 earnings report.
Higher patient volume and reduced expenses allowed the Chicago-based nonprofit to trim its operating loss year over year, while claim denials and payment delays kept its bottom line from looking even better.
For the fiscal year that ended June 30, CommonSpirit reported an operating loss of $875 million, a marked improvement from the $1.2 billion loss suffered in the previous year. The system's excess revenue over expenses as adjusted was $503 million, compared to a $82 million net loss for 2023.
Revenue increased 8.2% year over year to $37 billion as expenses jumped 7% to $37.8 billion. Volume growth drove much of the revenue, with the system experiencing improvements in adjusted admissions (6.6%), acute admissions (6.4%), acute inpatient days (2.5%), adjusted patient days (2.4%), outpatient visits (6.9%), and emergency department visits (4%).
However, CommonSpirit pointed to difficulties with payers for holding back greater improvement.
"CommonSpirit's modest revenue increases were offset by continued challenges with payers on denials and timely payment," the system said. "CommonSpirit has taken a firm stance on contract renewals so payers absorb a share of inflation, and processes and terms are improved to ensure providers get paid for the care they deliver."
Denials have been a constant source of frustration for providers. In a recent survey conducted by Experian, more than 75% of revenue cycle management executives said denials are increasing, compared to 42% in 2022.
As hospitals and health systems attempt to push care to lower acuity settings, CommonSpirit also highlighted its ambulatory care expansion, with nearly 60 sites added in the past year.
However, the revenue gains are mostly due to price increases and a reduction in staff, a study finds.
Being acquired by a health system can be a fruitful outcome for independent hospitals, but often comes with sacrifices to realize improved profitability.
Specifically, acquired hospitals increased profitability by around $14 million per year, largely driven by cutting nonclinical staff and passing on increased prices to consumers, according to a study published in the Journal of Political Economy Microeconomics.
Researchers at the University of Pennsylvania’s Leonard Davis Institute of Health Economics analyzed 101 hospital acquisitions from 2013 to 2017 for independent and system-owned hospitals to estimate the conditions under acquisitions.
Though acquired hospitals were more profitable, much of their net gain stemmed from cutting expenses. Of the $11.2 million in annual reduced expenses, 60% were from eliminating jobs mainly in administrative, maintenance and supply, medical records, and pharmacy departments.
The efficiency boost was also only a one-time gain, with system-owned hospitals not showing any further reductions in operating costs after being acquired by a different system.
In addition to slashing jobs, acquired hospitals also raised prices to generate profit. Average inpatient prices after acquisition increased by up to 11%, with prices per hospital stay jumping $856 on average.
The study attempted to investigate the impact of acquisitions on quality, but only one of three measures—readmissions, mortality, and patient satisfaction—showed noteworthy change. Acquired hospitals higher 90-day readmission for commercially insurance cardiac care patients, pointing to quality suffering following corporatization.
“Increases in 90-day readmissions after corporatization signal the potential for reduced quality,” researchers wrote. “A possible mechanism is staff reductions, which could affect support services known to reduce readmissions such as coordinating, tracking, and following up on post-discharge patients.”
As hospitals pursue M&A to improve financial viability, patients are often disadvantaged. However, the study revealed that hospitals aren’t as incentivized to be acquired after the first time, meaning consolidation can have diminishing returns.
Ed Banos shares with HealthLeaders how the construction of two community hospitals will be a game-changer for the health system.
University Health is undergoing a transformation in more ways than one. In the coming years, the San Antonio-based health system will essentially double in size and at the helm of the expansion is a new but familiar face ready for growth.
Now three months into the job as president and CEO of University Health, Ed Banos recognizes that his biggest challenge is the extra volume the system has on its hands. In the short term, the focus is on hiring and managing additional staff to deal with the increased demand. Ultimately, the construction of two community hospitals will allow the system to better serve existing patients and care for additional areas.
The two new hospitals, expected to open in early 2027 in the South and North East sectors of Bexar County, will add to University Health’s two current hospitals and more than 30 clinic and outpatient locations. Significant expansion is on the way but the system has already been adding to its main teaching hospital, University Hospital in South Texas Medical Center, over the past decade.
In 2014, the hospital opened the doors to its 10-story Sky Tower, adding 420 acute care beds to the facility. This past December, the system opened the University Health Women’s and Children’s Hospital on the Main Campus, providing the community with a 12-story, 300-bed location.
“University Health has had a great history of growing the last 10 years and I would say our biggest challenge is the continued growth that we have,” Banos told HealthLeaders. “A lot of people use University Health, we've grown our physician practices, our partnership with UT Health has also put a lot of demand for more surgeries, operating room time. So capacity has been a big push for us because the demand is there and with demand comes the need to hire more staff.”
Pictured: Ed Banos, CEO, University Health.
Banos understands the appetite for expansion at University Health after being with the organization since 2015, when he was named chief operating officer and executive vice president.
On July 1, he replaced longtime CEO George Hernandez, who was with the system since 1983 and served as CEO since 2005.
Now, Banos is eager to see through the growth that his predecessor imagined for the system.
“The most exciting thing is that the vision the board and George had prior was that we cannot just be a one-hospital system,” Banos said. “We are here to serve all of Bexar County and all of South Texas from our specialty related programs and we were never going to be able to provide that service in the future if we were a one-hospital system that was so landlocked in beds.”
The upcoming hospitals in South Side and North East will serve collective purposes, as well as individual ones, Banos stated.
“On the South Side, it's going to be a huge economic generator,” he said. “Our South Side has not had a lot of infrastructure put into it from a community standpoint. Us putting in that hospital now and a couple of housing developments now, you're going to see a real economic development change on the South side, better infrastructure, better paying jobs, which will lead to a lot of other great things.
“On the North East side, it's just important because that's a huge fast-growing area that already has the infrastructure but doesn't have a real good University Health presence. For us, that will be a new market but it will also be a good market where we can take care of patients that had limited access to University Health.”
Both hospitals will also allow the system to integrate technology more seamlessly. Banos admitted the term ‘hospital of the future’ is all too common these days, but that’s what he envisions for the new facilities because technology will be more built into their fabric than at a hospital like the Medical Center.
“We'll be able to really put technology in there,” he said. “So we think of ourselves having what we consider smart rooms that might be able to do telehealth, monitoring, those types of things. We really believe these community hospitals will be much more technologically advanced and capable because they're going to have the infrastructure built in them. With the stuff we're doing in our main hospital, a lot of that is being added on. We're having to put it on right now. But a hospital that will be built with all that infrastructure and all that technology, we'll be able to monitor patients from far away, we'll be able to use artificial intelligence to do a lot of our work that is being done much easier in a hospital that was built that way than one that is retrofitted.”
Achieving growth as a health system right now can be a challenge in the current economic climate. For University Health and Banos, the opportunity is one they’re poised to meet.
Reports of a separation come at a time when the company is struggling to perform, particularly with its insurance arm Aetna.
CVS Health could be on the precipice of breaking up its businesses, sending shockwaves across the industry.
The healthcare giant is reportedly conducting a strategic review and weighing a potential split of its retail and insurance units as it continues to face struggles in those sectors, according to Reuters and The Wall Street Journal.
CVS’ board of directors has retained bankers to facilitate the review, but a decision is not imminent and it’s possible the company won’t experience a significant change, WSJ reported. Hedge fund Glenview Capital Management, which owns about 1% of CVS’ shares, is seeking changes and met with the company’s executives to discuss strategies for improving operations.
"CVS’s management team and Board of Directors are continually exploring ways to create shareholder value," a CVS spokesperson told WSJ. "We remain focused on driving performance and delivering high quality healthcare products and services enabled by our unmatched scale and integrated model."
While CVS has pursued an integrated model by offering health insurance through Aetna, primary care through clinics like Oak Street Health, and a pharmacy benefit manager through Caremark, the strategy hasn’t been without its challenges.
To slash costs, the company is planning layoffs that would affect about 2,900 jobs, or almost 1% of its 300,000 employees, due to “continued disruption, regulatory pressures and evolving consumer needs and expectations,” a spokesperson said. The impacted positions are mostly corporate roles and the reductions will not affect front-line workers in stores, pharmacies, and distribution centers.
In August, CVS also announced plans to cut $2 billion in costs to help offset the rising expenses and floundering financial performance of Aetna, which saw its operating income in the second quarter drop 39% year over year.
Additionally, the results spurred the company to let go of Aetna president Brian Kane and hand the insurer’s operations over to CVS CEO Karen Lynch and CFO Tom Cowhey.
Aetna’s woes are driven by increased utilization in Medicare Advantage while star ratings and bonus payments have been adjusted, resulting in diminished reimbursement for payers.
On the retail side, CVS has upped its investment in Oak Street after acquiring the business for $10.6 billion last year.
As other retailers have softened their position in primary care space or exited the space altogether, CVS announced plans to open 25 more Oak Street clinics by the end of 2024. By placing the clinics at its pharmacy sites, CVS believes it can funnel more patients to its primary care offering and turn around the profitability of the business.
However, considering the costs associated with primary care, CVS may be more inclined to distance itself from that unit rather than Aetna.
The pharmaceutical distributor giant is strengthening its oncology business to compete with its peers.
In the latest move by a pharmaceutical distributor to solidify its position in the oncology market, Cardinal Health announced its plan to acquire Integrated Oncology Network for $1.1 billion.
By scooping up the physician-led independent community oncology network, Cardinal will add more than 50 practice sites and more than 100 providers to its oncology practice alliance Navista, allowing the company to jostle in the space with competitors like McKesson and Cencora.
ION’s practices will also gain access to Navista’s AI analytics capabilities, along with insights from the PPS Analytics and SoNaR technology solutions of Specialty Networks, which Cardinal acquired for $1.2 billion earlier this year.
"Driving growth in specialty continues to be a top priority, and we've made investments to expand our offerings through both Navista and our acquisition of Specialty Networks," Cardinal Health CEO Jason Hollar said in a statement. "With their proven model providing extensive support of community oncology across the cancer care continuum and healthcare ecosystem, we're confident Integrated Oncology Network will further accelerate our oncology strategy and enable us to create value for providers and patients."
Dublin, Ohio-based Cardinal continues to invest in specialty drugs and oncology, with the latter arena seeing stiff competition as companies vie for market share.
McKesson announced last month it was acquiring a controlling interest in Community Oncology Revitalization Enterprise Ventures (Core Ventures), a business and administrative services unit of Florida Cancer Specialists & Research Institute, for $2.5 billion.
Last year, Cencora partnered with TPG to seize a minority interest in OneOncology for $2.1 billion.
Calls to block ‘The Big Three’
Cencora’s deal was completed, but Cardinal and McKesson’s acquisitions are still pending regulatory approval. The American Economic Liberties Project and five other advocacy organizations, however, have asked the FTC to block both moves to keep the companies from further dominating the oncology market.
In the letter written to the federal agency, the groups highlighted that Cardinals, McKesson, and Cencora, or ‘The Big Three,’ account for 98% of the wholesaler industry.
When wholesalers wield their oncology market power, it’s “at the expense of cancer patients, who suffer from persistent drug shortages and higher prices,” the letter argued.
“We respectfully request that the FTC apply the same level of scrutiny to block McKesson’s proposed acquisition of FCS’ Core Ventures and Cardinal Health’s proposed acquisition of the Integrated Oncology Network, both of which exceed the threshold for merger review by at least ninefold,” the groups wrote. “Otherwise, American cancer patients will be left to pay the life-threatening costs of ever-increasing wholesaler concentration, casualties in an intensifying ‘cancer care arms race.’”
The move comes amid a series of changes for the health system as it pursues financial sustainability.
Rhode Island-based Lifespan has targeted the executive level for layoffs to save on rising expenses.
The hospital operator has shed 20% of its executive roles, allowing it to save $6 million in fiscal year 2025, according to a statement from Lifespan president and CEO John Fernandez.
"Lifespan implemented a strategic restructure focused on creating a one-system, one-team approach, designed to reduce executive overhead and streamline operations," Fernandez said in the statement. "Starting from the top like this allows us to allocate more resources directly to patient care and support areas."
Lifespan didn’t provide details on which positions will be affected by the restructuring.
The organization turned around its bottom line in fiscal year 2023 by posting $8.6 million in operating income and $37.1 million in net income, compared to a $76 million loss and $186.8 million deficit in 2022, respectively.
Nevertheless, Lifespan continues to deal with increased expenses, largely driven by labor costs. For the nine months ended June 30, the operator saw total operating expenses increase by $253.3 million (10.9%), with compensation and benefits jumping $107.4 million (7.7%). Compensation and benefits costs were spurred by the system adding 421 FTEs, creating an expense of $39.3 million.
As hospitals and health systems pour more resources into their clinical workforce, executive layoffs allow organizations to slash sizeable salaries without eliminating large quantities of staff.
For Lifespan, the decision comes on the heels of the system announcing in June that it will rebrand to Brown University Health in exchange for a $150 million investment over seven years from Brown University.
Lifespan is also acquiring two Massachusetts hospitals from Steward Health Care after announcing the move in August and receiving court approval for the sale earlier this month. The $175 million deal brings Fall River-based St. Anne’s Hospital and Taunton-based Morton Hospital under Lifespan’s control.
Here's what the guiding hands at three organizations recently told HealthLeaders about solving for their biggest pain point.
Whether you're at the helm of giant health system or leading a rural hospital, building and maintaining a sustainable workforce is almost certainly at the top of your to-do list.
As the saying goes though, there's more than one way to skin a cat. In the case of tackling workforce challenges for CEOs, there are multiple ways to go about solidifying recruitment and retention in your organization.
Some leaders are prioritizing the wellbeing of their people and thinking of ways to improve the workplace culture, while others are more focused on reducing the work burden through technology.
Three hospitals CEOs recently shared their approach to the workforce with HealthLeaders. Here's what they had to say:
"We're in the greatest healthcare workforce shortage in the history of the world," Crouse Health CEO and HealthLeaders Exchange member Seth Kronenberg said.
The pandemic is over, but the workforce is still recovering from its effects. One of the impacts has been a drain of workers exiting the industry, which is expected to only get worse in the coming years. By 2028, healthcare is projected to have a shortage of over 100,000 critical care workers nationwide, according to a report by Mercer consultancy.
One of the strategies Kronenberg highlighted to retain workers is to provide them with more flexibility and optionality so they don't feel inclined to leave, whether it's for an opportunity to transfer into another discipline or have more work-life balance.
"Healthcare in general, we all were caught a little flat-footed with, certainly with COVID, all of the opportunities people had to work remote," he said. "There were many more opportunities in other industries, other than the hospital environment. So now we want to make sure we can meet the demands of the workforce as we go forward."
Kronenberg will be among many senior-level leaders from hospitals, health systems, and medical groups at the Workforce Decision Makers Exchange in Washington D.C., from November 7-8 to discuss solutions to building the workforce of the future.
At Cedars-Sinai, Peter Slavin is set to take charge on October 1 as the Los Angeles-based health system enters a new leadership era.
Coming into the role, Slavin shared that he wants to shape the workforce by improving the experience for clinical staff and leaning on technology to counteract the buildup of administrative tasks.
"Clearly the workforce was traumatized during the pandemic and is slowly recovering," Slavin said. "How do you make the work environment as positive and joyful as possible?"
Investing in and implementing generative AI can go a long way to easing the load on physicians, Slavin highlighted. By fighting burnout among your physicians and nurses, CEOs can significantly increase their chances of holding on to staff and keeping them happy.
"One of the sources of trauma that the healthcare workforce is facing is just the trauma caused by spending too much time in front of computers and not enough time in front of patients," he said. "Generative AI and other aspects of artificial intelligence, there's incredible opportunity to shift that balance between time in front of computers and patients and make it much more favorable from clinician standpoint.
"But I would emphasize that I don't think technology is the only answer to the issue. I think it's a variety of other things. It's just management paying close attention to the needs, the voices of the workforce and making sure that we're as attentive as ever to how to make the work environment as positive as possible."
At Oregon-based Grande Ronde Hospital, CEO and fellow HealthLeaders Exchange member Jeremy Davis understands that his organization has to be even more proactive with workforce strategies as a rural hospital.
That means understanding and being attentive to the needs of his staff, which allowed Grande Ronde to cut down on open positions from 220 two years ago to 50-60 in July.
"That took a lot of reflection and introspection about some of our policies and procedures," Davis said. "We have updated our personal policy manual and tried to find ways where we can be a little bit more flexible."
Developing nurses of the future through a nurse residency program and a partnership with a local university is another way Grande Ronde is adding to its workforce. By building a pipeline and training newer generations of workers, CEOs can mitigate the consequences of staff turnover and an aging out of older workers.
"It also just comes down to culture of being an organization that people want to be a part of," Davis said. "We're not perfect. We still have our things that we need to improve on but we're certainly listening. We're certainly trying and when people see an organization that's growing and trying to expand and trying to improve, they want to be a part of that and help determine that destiny."
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