The payer is teaming up with private equity firm Clayton, Dubilier & Rice on the joint venture.
Elevance Health is following its competitors into the primary care arena with its own model.
The insurer and its private equity partner Clayton, Dubilier & Rice introduced Mosaic Health months after announcing plans in April, allowing Elevance to expand its reach with a primary care network in a similar vein as its peers.
The joint venture will combine the capabilities of CD&R’s portfolio companies, apree health and Millennium Physician Group, with the advanced primary care solution of Elevance’s Carelon Health added into the mix once it receives regulatory approval.
Through Mosaic, Elevance will be able to deliver a community-based care model supported by unique digital patient engagement, care coordination, and navigation capabilities, according to the announcement.
"Mosaic Health will innovate on existing risk-based care delivery models, and I am excited to work closely with its operating companies and Elevance Health to foster collaboration and help Mosaic Health's operating companies better serve our providers and deliver exceptional care and services to more patients and communities," CD&R operating partner Clay Richards, who will serve as Mosaic Health executive chairman, said in the news release.
"Mosaic Health demonstrates CD&R's continued commitment to investing in and growing innovative healthcare companies that increase access to high-quality and affordable healthcare, and we are excited for this new chapter of innovation, expanded access and growth."
The primary care space is littered with retailers and disruptors trying their hand but running into difficulties scaling.
Yet payers like CVS Health continue to double down on primary care expansion due to confidence in their ability to leverage their health plans. Insurers can guide patients to their primary care network and reap more profit by taking a comprehensive, whole-health approach.
Mosaic will allow Elevance to offer its health plans alongside Medicare, Medicaid, and commercial plans, serving nearly one million patients across 19 states through apree and Millennium, according to the news release.
If Carelon’s assets are approved to enter the venture, Elevance will be able to utilize the clinics of its care delivery business to push Mosaic.
Governor Maura Healey's office will facilitate the transition of the hospitals to new ownership to ensure they remain open.
As Steward Health Care continues to navigate bankruptcy, the embattled health system's presence in Massachusetts finally appears at an end.
Governor Maura Healey announced that the state has reached deals in principle for four Steward hospitals and is wrestling away control of another to transfer the facilities to new owners, allowing them to stay open.
If the transactions are completed, Holy Family Hospitals in Haverhill and Methuen will be operated by Lawrence General Hospital, while Morton Hospital and Saint Anne's will go to Lifespan, and Good Samaritan Medical Center will go to Boston Medical Center.
After the state seizes control of Saint Elizabeth's through eminent domain, the hospital will eventually be operated by Boston Medical Center as well.
"Today, we are taking steps to save and keep operating the five remaining Steward Hospitals, protecting access to care in those communities and preserving the jobs of the hard-working women and men who work at those hospitals," Healey said in a statement. "Our team under Secretary Kate Walsh worked day in and day out to secure new, responsible, qualified operators who will protect and improve care for their communities. We're grateful for the close collaboration of the Legislature to develop a fiscally responsible financing plan to support these transitions."
In announcing the decision to seize control of Saint Elizabeth's, Healey accused Steward landlord Macquarie Investment Partners and lender Apollo Global Management of putting their own interests above those of the people of Massachusetts.
"Enough is enough," Healey said.
The state's deals, however, will not affect Carney or Nashoba Valley hospitals, which are on track to close after not receiving qualified bids. In the meantime, the administration said it has committed $30 million to keep the hospitals open through the end of the month and is "focused on supporting workers and connecting them to new jobs while also safely transitioning care."
Steward's problems in Massachusetts may be resolved soon, but the company still has divestures to see through elsewhere.
In May, Steward filed for bankruptcy before putting all 31 of its hospitals up for sale as it faced $9 billion in total liabilities.
Much of the focus has been on the sale of Steward's physician group, Stewardship Health, which was initially being scooped up by UnitedHealth Group's Optum until the deal fell apart. Earlier this month, Stewardship was bought for $245 million by a private equity firm.
Steward has struggled to nail down buyers and lock in deals due to the interests of its landlords and lenders.
This week, the health system filed a lawsuit against Medical Properties Trust for interfering in its sales by working with potential buyers without Steward's consent.
Hundreds of rural facilities across the country are facing serious financial problems, a new report reveals.
A growing number of rural hospitals in the U.S. are hitting a breaking point.
Due to severe financial challenges, more than 700 facilities—over 30% of rural hospitals in the country—are facing closure, including 360 being at immediate risk, according to analysis by the Center for Healthcare Quality and Payment Reform.
More than 100 rural hospitals have already closed in the past decade, while over two dozen facilities have eliminated inpatient services in 2023 and 2024 to qualify for federal grants that are only available for rural emergency hospitals, the report stated.
The authors posited that the primary factor putting so many rural hospitals at risk of closure is low reimbursement from payers. While these hospitals are also losing money on uninsured and Medicaid patients, the biggest losses come from patients with private insurance. With about half of the services at the average rural hospital delivered to patients with private insurance, lack of adequate reimbursement from private payers is putting facilities in an unsustainable position.
Rural hospitals also serve a smaller number of patients as compared to large hospitals, which results in less revenue for rural facilities. To combat this problem, the report argued that both private and public payers should be required to increase payments to prevent closures, which the authors said would cost $5 billion per year, or an increase of 1% in total national healthcare spending.
Another way to support rural hospitals is to create standby capacity payments from private and public payers to support the fixed costs of essential services, according to the report.
Even making telehealth flexibilities permanent instead of allowing them to expire on December 31 would go a long way to supporting rural health, Grande Ronde Hospital CEO and HealthLeaders Exchange member Jeremy Davis recently told HealthLeaders.
Davis testified in front of the Senate Finance Committee on rural healthcare in May and advocated for Congress to take action to keep hospitals from closing their doors.
“One of the things that I said in my testimony is, as a rural hospital administrator, we're looking for a help up, we’re not looking for a handout,” he said. “We want to be good stewards of the resources. We recognize funding is complex but trust us, enable us. There's a lot of really good people that are working in rural that are used to doing some great things with limited resources.”
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A study revealed what top leaders would do differently if they had the chance to do it over again.
If you’re a CEO, chances are high that you wish you could go back in time and change a decision you made or an action you took. Hindsight is 20/20 after all.
First-time CEOs and those taking the helm at a new organization may not be able to avoid regrets altogether, but they can minimize them by learning from their peers’ experiences.
So, what would fellow CEOs do differently after reflecting on their first year on the job? Russell Reynolds Associates tried to find out the answer by interviewing 35 CEOs who had been in their role for 12 to 18 months, along with collecting data from 178 CEOs. The findings were laid out in a Harvard Business Reviewarticle.
Make changes faster
The most common regret among respondents was not moving fast enough to change and build their teams, chosen by 66% of CEOs.
This answer was selected more by second- and third-time CEOs than by first-time CEOs, but it was the latter group that made their first change quicker on average—2.6 months versus four months.
Of course, making changes for the sake of change isn’t an effective approach. CEOs should find a balance between sitting back and being too aggressive.
Phil Wright, CEO at Memorial Regional Hospital South, recently shared with HealthLeaders his tips to success for incoming CEOs, which included resisting sudden change.
“Get in, get acclimated to the organization, get to know people, understand why certain things were done or not done, and then start gathering information to put yourself in a position to make decisions,” Wright said.
Once CEOs feel they’ve got the lay of the land, that’s the time to start leaving your mark.
Adapt leadership style
The second-most common regret among surveyed CEOs was not altering their leadership style, chosen by nearly half of respondents (48%).
One of the difficulties many first-time CEOs encounter is recognizing that their new role demands a different approach. Of respondents who said their top regret was leadership style, 25% revealed they took too long to mentally accept the position and leave behind the thinking they had from their previous role.
For example, CEOs shouldn’t be managing others, but leading them, recently retired Banner Health CEO Peter Fine toldHealthLeaders.
Whether that manifests in how you motivate people or how you delegate, it’s crucial CEOs understand that the job requires a different mentality, even to other C-suite positions.
Engage with the board
Another aspect of being a CEO that newly appointed leaders can struggle with is having a positive relationship with their board.
One-quarter of respondents (25%) said their biggest regret was not working better with the board during their transition, while over 63% reported having some sort of conflict with their board in their first year in the role.
Going from one boss to multiple can be an eye-opening transition, but by emphasizing transparency and alignment, CEOs can improve board interactions and avoid missteps along the way.
The health system's board voted to oust Airica Steed for performance issues while she was on medical leave.
MetroHealth System appears in to be in line for another legal battle after kicking a second CEO out the door in less than two years.
The Cleveland-based hospital operator cited performance deficiencies in their firing of Airica Steed, but the CEO claims she was “unlawfully terminated” while on approved FMLA leave and suggested the decision was retaliation for her raising concerns over discrimination and ethical issues at the company.
Steed took over at the system in 2022, becoming the first woman, Black person, and nurse to lead the nonprofit. Her appointment came after MetroHealth fired previous CEO and president Akram Boutros for allegedly paying himself $1.9 million in authorized bonuses.
Boutros denied the allegations and filed a lawsuit against the system but withdrew the suit due to undergoing treatment for a serious illness. His attorney stated he would refile the case as soon as his health improved.
Now, MetroHealth is clearing the deck again by letting go of Steed.
“It has become clear that the Board and Dr. Steed fundamentally disagree about the priorities and performance standards needed from our CEO for MetroHealth to fulfill its mission,” E. Harry Walker, MD, chair of the board of trustees, said in the news release. “We believe Dr. Steed’s performance is not meeting the needs of MetroHealth. As a result, we have lost confidence in her ability to lead the organization going forward and believe it would not be in the best interest of the System for her to continue in her position. Therefore, we are exercising our right to terminate her at-will contract.
“We thank Dr. Steed for her service and wish her well in her future endeavors. We had high expectations when she arrived in 2022 and are sorry those expectations have not been met.”
Steed’s attorney, F. Allen Boseman, Jr., issued a statement that the CEO was shocked by the termination.
“Dr. Steed, who is the first female and African American CEO of MetroHealth, is extremely disappointed in the actions of MetroHealth’s Board of Trustees and is stunned that the Board has taken action that directly conflicts with prior representations made publicly as well as to Dr. Steed privately,” Boseman said.
MetroHealth announced on July 26 that Steed was going on medical leave and named Christine Alexander-Rager as acting president and CEO. “We look forward to [Steed’s] return,” the system said in the news release.
Despite MetroHealth’s board citing performance issues in their decision to fire Steed, Boseman said the CEO was given a positive 2023 performance review. Steed earned a $381,156 bonus due to meeting goals, in addition to her base salary of $900,000.
Signal Cleveland, meanwhile, reported that tension between MetroHealth and Steed was bubbling for months, stemming from her frequent travel away from the system and the expenses those trips accumulated.
Rather than performance or her expenses, Boseman suggested that the system’s decision was in response to Steed engaging in protected activity.
For now, MetroHealth will be led by Alexander-Rager, who has been with the system for almost 30 years, most recently serving as interim executive vice president, chief physician executive and clinical officer. She previously served as MetroHealth’s chair of family medicine for 14 years.
“With Dr. Steed’s departure, we are confident we have senior leaders who can step in and guarantee that MetroHealth will continue to be a beacon of excellence for our patients and our community,” MetroHealth said.
The health system is hoping to have finally found a new owner for its four hospitals in CHA Partners.
Prospect Medical Holdings’ winding history with Crozer Health may be coming to an end.
After acquiring Crozer-Keystone Health System for $300 million in 2016, struggling to keep it financially viable, and falling short on a sale in 2022, Prospect has now signed a letter of intent with real estate and development company CHA Partners to divest the four-hospital system.
As part of the deal, Crozer, which switched to for-profit when it was bought by Prospect, will revert to nonprofit status under CHA.
In the announcement, CHA said it will work closely with consulting firm Healthcare Preferred Partners over the next several months to complete the transaction, which will require a definitive agreement and regulatory review.
Since being founded in 2008, CHA has acquired five hospitals in New Jersey, including “successfully transitioning one of its hospitals back to a not-for-profit status and integrating it into a large regional healthcare network,” the news release said. CHA also owns and operates ambulatory surgery centers, medical office buildings, and skilled nursing/assisted living facilities.
“We believe this is a positive step for our physicians, employees and the communities we serve, and will help secure Crozer Health’s future as a critical healthcare provider in Delaware County,” the announcement said.
Prospect previously tried to sell Crozer to ChristianaCare Health System in 2022 before talks fell apart. The two sides said at the time that “the economic landscape has significantly changed, impacting the ability of the sale to move forward."
Later that year, Prospect said it would close Delaware County Memorial Hospital and reopen it as a behavioral health hospital, which prompted a lawsuit from the Foundation for Delaware County and the state attorney general.
This past October, all sides agreed to suspend litigation for 270 days as Prospect searched for another buyer for Crozer that would allow it to operate as a nonprofit.
Prospect is also attempting to divest hospitals in other markets and encountering several roadblocks.
The health system is dealing with a lawsuit brought on by Yale New Haven Health after the two sides agreed to a $435 million sale of three Connecticut hospitals owned by Prospect. Yale alleged that Prospect breached their contract pattern by subjecting the hospitals to “irresponsible financial practices, severe neglect and general mismanagement.”
Meanwhile, Prospect was given 40 conditions to meet by Rhode Island Attorney General Peter Neronha to complete the sale of two safety net hospitals to The Centurion Foundation. The requirements include Prospect paying unpaid bills owed by the two hospitals’ operator, CharterCARE Health Partners, totaling $24 million.
The company also announced plans to slash $2 billion in costs to relieve pressure on its bottom line.
CVS Health is making major moves to turn around the floundering performance of its insurance arm.
The retail giant said CEO Karen Lynch will take over “day-to-day management” of Aetna, with the insurer’s president, Brian Kane, leaving the company. Lynch, who was president of Aetna from 2015 to 2021 before becoming CVS Health’s CEO, will oversee the insurer’s operations along with CFO Tom Cowhey.
The announcement accompanied CVS’ second quarter earnings report, which revealed a downturn that caused the organization to reduce its earnings expectations for the third time this year. Now, CVS anticipates an adjusted earnings per share of $6.40 to $6.65, down from at least $7.
The reduction is the result of the company experiencing nearly a 9% drop in net income year-over-year to $1.77 billion, compared to $1.9 billion in the same period last year. Much of that is attributed to the woes of Aetna, which suffered a 39% decrease in operating income to $938 million for the quarter.
“The financial performance of this business was not meeting my expectations, and I decided to make a change,” Lynch told investors in an earnings call.
“Relative to the priorities there, I will be establishing a very strong management process, driving execution of improved financial and operational performance, and those will be my key priorities.”
In the news release reporting its earnings, CVS said Aetna’s struggles are being spurred by “increased utilization and the unfavorable impact of the previously disclosed decline in the Company's Medicare Advantage star ratings for the 2024 payment year within the Medicare product line, higher acuity in Medicaid primarily attributable to the resumption of redeterminations, as well as a change in estimate related to the individual exchange business risk adjustment accrual for the 2023 plan year recorded in the second quarter of 2024.”
Insurers are finding Medicare Advantage (MA) not as profitable as before with the new rate cuts and adjustments to star ratings, which determine how much payers will earn in bonus payments.
Aetna has also expanded its MA supplemental benefits and is seeing higher utilization of dental and pharmacy services, Cowhey told investors.
To combat the rising expenses, CVS also announced its plan to achieve $2 billion in cost savings, “driven by further streamlining and optimizing our operations and processes, continuing to rationalize our business portfolio, and accelerating the use of artificial intelligence and automation across the enterprise as we consolidate and integrate,” Lynch said.
Primary care is one area where CVS continues to invest in. The company recently said it will open 25 Oak Street Health clinics alongside their stores in 14 states by the end of this year, during a time when other retailers are backing off from the space.
For the second quarter, Oak Street’s revenue grew 32% year-over-year, “reflecting strong membership and growth,” Lynch said.
CVS is hoping the integration of Oak Street clinics with Aetna, as well as the introduction of co-branded Aetna and Oak Street plans in the 2025 annual enrollment period, will continue to benefit both its primary care and insurance business going forward.
The difference in assets between private equity-backed hospitals and all other hospitals after two years is stark.
Private equity can often inject much-needed capital into hospitals, but it can also leave facilities in worse shape than before seizing ownership.
According to a recent study published in JAMA, hospital assets decreased by 24% two years after private equity acquisition, highlighting the destructive effect of private equity’s role in healthcare.
Researchers examined 156 hospitals acquired by private equity from 2010 to 2019 and compared them with 1,560 similar, but not private equity-owned hospitals. Capital assets, which included buildings, equipment, and land, were based on Medicare cost reports from 2006 to 2021.
The findings revealed that the total capital assets at hospitals acquired by private equity decreased by 15% on average in the two years after acquisition, while the assets of the other hospitals increased by 9.2% in the same period, resulting in a net difference of just over 24%.
The decline in assets is attributed to ownership selling off land and buildings to repay investors, leaving hospitals less capable of caring for patients.
“Private equity has been incredibly disruptive in the health system space,” Banner Health CEO Amy Perry recently told HealthLeaders.
Another recent report by the Private Equity Stakeholder Project found that 21% of all healthcare bankruptcies in 2023 involved organizations owned by private equity. The 17 instances more than doubled the number of such bankruptcies from 2019 (eight) and easily surpassed the amount from the past three years combined (13).
The good news for healthcare? Private equity involvement in the industry is slowing down. Private equity-owned providers represent just 3.3% of the country’s total healthcare provider spending, while the first quarter of this year saw a significant drop in private equity dealmaking, according to PitchBook.
“Buying a part of healthcare and trying to make it work on its own is extraordinarily difficult and that's where people have kind of failed,” Perry said. “They get in, they are in one little slice, but that one little slice has to work with payers, has to work with pharma, has to work with suppliers, has to work with this crazy reimbursement system we have and I think that’s when the reality of all of that comes together. The complexity, the amount of work it takes to make those deals profitable becomes a little less exciting.”
The resulting health system is one of the largest nonprofits in the country.
Jefferson Health and Lehigh Valley Health Network (LVHN) have completed their mega-merger to consolidate care in Pennsylvania in a major way.
After signing a non-binding letter of intent to combine in December and inking a definitive agreement to combine in May, the two sides have now closed the $14 billion transaction, creating a health system that is among the 15 biggest nonprofits in the U.S.
The organization features 32 hospitals and more than 700 sites of care to serve regions in eastern Pennsylvania and southern New Jersey.
Jefferson Health CEO Joseph Cacchione will remain at the helm of the combined system, while LVHN president and CEO Brian Nester will transition into an executive vice president/COO role, reporting to Cacchione.
“We are delighted to bring these two incredible organizations together as we look ahead at all the good we will do for the communities we’re privileged to serve,” Cacchione said in the news release. “This milestone is even more significant as Jefferson celebrates its bicentennial, marking our longstanding commitment to improving lives through education, health care and discovery.”
The merger also allows Jefferson Health to expand its health plans into Lehigh Valley area, allowing it to reach more patients and grow its insurance business.
For LHVN, it will adopt the Jefferson Health brand and be afforded greater reach as part of the partnership.
“As health care continues to rapidly evolve, two leading health care organizations are forging ahead to build a bright future for health care in our communities,” Nester said. “Our combination will enhance access and elevate service by bringing more specialists, locations, expertise, research and education to the patients and communities we serve.”
A new study suggests leaders of health systems are personally incentivized to pursue consolidation.
As CEO salaries at health systems continue to rise, compensation may be influencing the appetite for hospital mergers.
Being at the helm of a larger health system has garnered an increase in pay in recent years, indicating that CEOs are rewarded for consolidating, according to a study from Rice University’s Baker Institute for Public Policy.
Researchers analyzed compensation data for 1,113 hospitals and nonprofit health systems in 2012 and 868 organizations in 2019 using IRS filing information and hospital statistics.
The average salary for CEOs of independent hospitals was $996,000 (adjusted for inflation) in 2012 before climbing 30% to approximately $1.3 million by 2019. CEOs at health systems with over 500 beds experienced an even greater pay raise, from 144% more than their peers at hospitals with fewer than 100 beds in 2012 to 170% more by 2019.
Nearly half (44.5%) of the increase in compensation was for CEOs who led smaller hospitals that reported no profits and offered no charity care, suggesting that performance wasn’t a major factor. However, the study noted that the rise in pay in those cases could be due to improvements in care quality or justified by the increased complexity of leading a hospital or health system.
Meanwhile, 28.5% of the compensation increase was mostly attributed to higher pay generosity for CEOs at systems with over 500 beds, with much of the remaining 27% of pay rise going to CEOs who guided larger and more profitable health systems.
“Our findings suggest that CEOs may be incentivized to consolidate health care systems in order to reap the financial rewards of leading a larger, more profitable health care system,” Derek Jenkins, lead author of the study and a postdoctoral scholar in health economics at the Baker Institute, said in the news release.
Boards governing hospitals and health systems recognize that CEOs must be paid competitive salaries to meet the demands of running an organization in the wake of the COVID-19 pandemic.
With 2023 seeing a 42% increase year-over-year in CEO turnover, leaders are seemingly sticking around in one place for less time than they did in the past. A hefty salary can go a long way to locking down a CEO for years, providing organizations with continuity.
Still, decision-makers at hospitals should consider what goes into calculating their CEO compensation figures. Tying pay raises to quality and performance instead of size of the system would allow organizations to spend their money in a more constructive way.
Vivian Ho, co-author of the study, chair in health economics at the Baker Institute, professor of economics at Rice, and professor at Baylor College of Medicine, said: “The factors that hospital boards use to structure CEO compensation may be contributing to the affordability crisis in American health care and should remain in the forefront of the minds of policy makers.”
