The two organizations have opted to create a four-hospital network called Hudson Health System.
Hudson Regional Hospital and CarePoint Health System are going from foes to partners in a financially motivated decision to form a new healthcare network.
The sides announced the signing of a letter of intent to create Hudson Health System, which will include CarePoint’s three hospitals—Bayonne Medical Center, Christ Hospital in Jersey City, and Hoboken University Medical Center—and Hudson Regional Hospital.
The move isn’t officially a merger, but is driven by the financial distress of CarePoint, which recently said it has requested $130 million in state funding to continue operating “at an optimal pace.” This past October, the New Jersey Department of Health noted in a letter sent to local and state officials that the system was operating at a 14.14% loss. Additionally, CarePoint is facing several lawsuits from vendors who claim they are owed nearly $5 million, according to a report by NJ.com.
The financial turmoil has led CarePoint to pursue a partnership that significantly improve its chances at survival, albeit one that requires teaming up with a competitor that has been on the other side of a much-publicized quarrel.
The frosty relationship between the two organizations has included a fight over the operation of hospitals and a lawsuit by CarePoint accusing Hudson Regional Hospital of collusion. Under the agreement to form, pending litigation will be dismissed.
Yan Moshe, chairman of Hudson Regional Hospital, will be chair of Hudson Health System, while CarePoint president and CEO Achintya Moulick will serve as the president and CEO of the new network.
"Since entering this marketplace in 2018 our team has driven a patient-focused mission that incorporates technology and engages leading healthcare professionals to deliver care under a new model," said Moshe in the news release. "I am excited to bring our proven track record and experienced team in partnership with Dr. Moulick to build a high quality, stable health care system that the county deserves.”
Moulick said: "Hudson County is the most diverse and dynamic community in New Jersey, and its residents deserve nothing less than exceptional care, affordable access, the most advanced specialties and technology, and the highest caliber physicians to serve patients' needs, especially the underserved communities that rely on our facilities.
"Yan Moshe has shown the type of innovative leadership that will allow us to thrive in an ever-changing healthcare environment, and with adequate state support I believe we can build a hospital system that will deliver on its core mission."
The Midwest organizations called off the move to create a 25-hospital health system.
Another merger bites the dust. This time, with little (known) scrutiny from the Federal Trade Commission (FTC). So why did Wisconsin-based Marshfield Clinic Health System and Minnesota-based Essentia Health abandon their proposed union?
According to an announcement put out by the organizations, the decision was a mutual call—one made nearly six months after they signed an integration agreement in July to form a 25-hospital health system serving Wisconsin, Minnesota, Michigan and North Dakota.
“We have decided that a combination at this time is not the right path forward for our respective organizations, colleagues and patients,” Marshfield Clinic interim CEO Brian Hoerneman and Essentia Health CEO David Herman said in the release.
Despite the merger falling apart, the systems shared that they’ll still look to work together going forward.
“We will continue to seek opportunities for collaboration as two mission-driven, integrated health systems dedicated to sustainable rural health care,” they said. “Our organizations have great respect for one another, and we each remain committed to strengthening the health of our communities as we deliver high-quality, compassionate patient care.”
The proposed merger was first announced in October 2022 and the systems expected the deal to close at the end of 2023, pending regulatory approval. In October 2023, Minnesota Attorney General Keith Ellison stated this his office would review the deal’s compliance with state and federal antitrust laws.
This marks the second occasion Marshfield Clinic has been involved in a potential merger that was eventually called off in the past four-plus years. In December 2019, the organization and Gundersen Health System chose to not follow through on a deal that would have created a 13-hospital system.
Through the first nine months of 2023, Marshfield Clinic reported an operating loss of $133.6 million, compared to an operating loss of $92.6 million over the same period in 2022. While operating revenue increased from $2.28 billion to $2.32 billion, expenses also jumped 3.5% to $2.5 billion.
Essentia, meanwhile ended fiscal year 2023 with $121.7 million in net income, a significant increase from the $72 million in net loss in 2022.
Though the FTC wasn’t publicly involved in evaluating the merger between the systems, the agency has had its hand in several other deals recently. According to the FTC and Department of Justice’s recently released Hart-Scott-Rodino Report, 50 merger enforcement actions were filed in fiscal year 2022, which was the most since 2021.
The ramifications of an election year on healthcare could be significant, says one CEO.
Many of the challenges CEOs have been dealing with since the pandemic aren't going anywhere in 2024, but this year brings a new wrinkle that will impact leaders in undetermined ways.
It's no secret that this is a presidential election year. Depending on how it shakes out, healthcare could be greatly affected for the foreseeable future—much more that most sectors. That makes 2024 an important year for the future of the industry, Karmanos Cancer Institute president and CEO Boris Pasche told HealthLeaders.
"That is what I see as the looming potential changes," Pasche said. "Where will Congress and the new president take us in the next in the next four years?"
Whether incumbent president Joe Biden remains in office or is beaten by a challenger will impact all areas of the healthcare system, from hospitals to insurers and everything in between.
"There are different philosophies in terms of healthcare, in terms of coverage, in terms of insurance," Pasche said. "Obamacare is now more than 15 years old. It's still there, but there are a lot of things that will probably be discussed during this this election year—price of drugs, accessibility, insurance coverage. So I think it's a very important year to come in terms of the future of healthcare because we know that healthcare eats up a very large amount, a very large fraction of the national budget and for good reasons."
How much can CEOs plan for what may come in November? Very little, Pasche said. Even with forecasts on the regulatory climate, leaders will have to wait and see like the rest of America on what's in store.
While Pasche believes the government is and will continue to be dedicated to cancer care, he doesn't know exactly what that will look like. He pointed to the 340B program, which was hit by prescription drug payment cuts for 340B-covered entity hospitals by nearly 30% in CMS' final rule in 2018 during Donald Trump's presidency. In June 2022, under a different administration, the Supreme Court unanimously rejected the payment cuts to hospitals, deeming them unlawful.
"That's one example that show you how tenuous this balance is in terms of healthcare depending on political decisions," Pasche said.
Other potential changes on the horizon will be weighing on the minds of CEOs over the next 12 months, even if they're unclear on what their response will be.
Addressing labor shortages and unrest will once again be critical.
Healthcare CEOs with New Year’s resolutions undoubtedly have improving their workforce near the top of their list. Labor challenges were a major theme of 2023 and it doesn’t appear as if that’ll be any less of a pain point in the coming 12 months.
How those challenges and the strategies used to alleviate them evolve is yet to be seen, but leaders can get a better idea of what’s ahead by tracking the shifts occurring in the industry.
Here’s a look at three workforce trends for CEOs to keep an eye on this year:
Unionization
While healthcare is no stranger to unions, the realities of a post-COVID world are creating more unrest among workers.
Whether it’s doctors, nurses, or other staff, there’s plenty of discontent coming as the result of burnout, lack of compensation, and working conditions.
Physicians especially are showing their frustration as they feel the squeeze from hospitals and health systems under financial pressure, which is not only affecting them personally, but impacting their patients’ quality of care. As health systems seek out mergers and acquisitions, further consolidation of physicians will continue to be a reason for unionizing.
The more strikes occur and unions form, the more workers across the country will feel emboldened to organize. How will CEOs respond? The best way to deal with unionization is to prevent it from happening in the first place and hospital leaders will have to be proactive this year in heading off unrest before it becomes a movement.
Investing in people
Keeping workers happy is a clear priority for CEOs, but leaders are recognizing that it’s about appealing to workers’ desires, as well as their pockets.
With hospitals prudently managing labor costs and cutting back on agency utilization, it’s as important as ever for organizations to reduce workforce turnover. To achieve that, CEOs must be willing to invest in their workers to retain and attract talent.
That investment goes beyond pay increases. Hospitals that are struggling financially need to be creative in how they compensate and reward their workers. According to a recent survey by Aon, most health systems are adding premium benefits, including 95% offering tuition reimbursement programs, 93% offering flexible work options, and 84% offering personal level.
Supporting workers in all aspects will be an emphasis for CEOs to combat labor shortages.
AI’s role
How artificial intelligence affects the workforce isn’t just a healthcare question, but a global question. Healthcare, however, tends to adopt new technology more slowly than most industries, so it will be interesting to see how willing hospital CEOs are to invest in and implement AI in 2024.
It’s hard to ignore though that workforce challenges are creating a greater need for innovation. AI has the potential to significantly supplement the workforce by improving efficiencies and removing burden from workers, but it also requires educating staff on new technology.
AI’s presence is also affecting the C-suite with new leadership positions being created to oversee strategy. How different will executive teams look from traditional structures moving forward?
Ultimately, CEOs must accept that trial and error will be required in a lot of cases before AI’s role in healthcare is fully realized.
Karmanos Cancer Institute CEO Boris Pasche offers his advice to other leaders.
As a physician-turned-CEO, Karmanos Cancer Institute’s Boris Pasche has a better understanding than many of his peers on the unrest physicians across the country are feeling right now.
Burnout, workforce shortages, unionization… there are several challenges CEOs face in ensuring their physicians are satisfied and eager to work for them. Thinking like a physician helps, but the formula isn’t a complicated one, according to Pasche.
He recently joined the HealthLeaders podcastand shared his advice for fellow CEOs wanting to improve physician relations at their organization.
New leaders will make their impact across the healthcare industry.
As the calendar flips to 2024, several healthcare organizations will turn over their CEO position in the new year.
Health systems, payers, and pharma companies will be affected by leadership changes at the top, whether it’s to shift course with a fresh face or move on from a longtime steady hand.
The changes are coming during a time when CEO turnover is occurring more frequently, according to a report from executive coaching firm Challenger, Gray & Christmas. Through the first nine months of 2023, 125 CEO changes took place at hospitals, which was a 67% increase over the 75 changes over the same period in 2022.
Here’s a look at three new CEOs at notable organizations that are worth monitoring in 2024:
The New York City-based system announced its succession plan to replace Kenneth Davis, who has served as its CEO and predecessor since 2003. Davis will give way to Carr early this year and transition to executive vice chairman of Mount Sinai’s Board of Trustees.
The announcement was a bit of a surprise considering Mount Sinai has said in 2021 that Davis would continue in his role through the end of 2024. However, it’s possible the system wants to proactively put new leadership in place to guide it through financial headwinds, which saw it post a 1.1% EBITDA margin through the first six months of 2023, according to Fitch Ratings. Mount Sinai also announced plans to close its Beth Israel facility in July because of low patient volume, causing it to lose $150 million a year.
Carr is currently a professor of emergency medicine for Ichan School of Medicine at Mount Sinai and char of emergency medicine.
Another succession plan is playing out at Humana, where Rechtin will take over for Bruce Broussard, who has been at the helm of the payer since 2013. Broussard will stay on as a strategic advisor into 2025 while Rechtin serves as president and chief operating officer until moving into the CEO role in the second half of the year.
Of course, Humana’s transition-of-power announcement was soon followed by groundbreaking news that the payer was in merger talks with Cigna. Though the deal ultimately fell apart, it’s possible Humana may still be an acquisition target for Cigna, according to reports.
With no merger currently in the works, Humana can focus on handing over the reins to Rechtin and continue building on its success in Medicare Advantage (MA), where it has the second-largest market share. However, Rechtin will have to steer the payer through a MA landscape that is getting more competitive and less lucrative due to regulatory changes.
The new leader of the retail pharmacy company has already started his tenure after being appointed this past October, but he’ll have all of 2024 to make his mark on an organization that is in a challenging spot.
Firstly, Wentworth is sliding into the position after CEO Rosalind Brewer abruptly exited in September, which was followed by CFO James Kehoe and CIO Hsiao Wang choosing to depart as well. Though Wentworth is a veteran executive, he’s an external hire with his most recent experience coming as founding CEO of Cigna subsidiary Evernorth.
He’s also stepping into a difficult financial situation as Walgreens announced layoffs for about 10% of its workforce and reported a $180 million loss in the fourth quarter of 2023. Wentworth’s background and expertise appears to align with the direction Walgreens wants to go as it looks to expand beyond its pharmacy business and into a more rounded healthcare organization.
The area of focus was top of mind for leaders across the industry.
Workforce was arguably the biggest pain point for CEOs in 2023 as hospital leaders across the country were forced to consider ways to address labor costs and shortages.
Over the past year, HealthLeaders spoke to CEOs from a wide range of organizations—big and small, urban and rural—and keeping the workforce strong was often one of the first things that was mentioned.
Here’s what 10 CEOs said about workforce challenges in 2023:
The president and CEO of the nonprofit integrated health system shared five steps that the organization has taken for a “multi-pronged approach” to tackling labor shortages. Those steps include becoming a preferred employer and streamlining recruitment.
At the rural, 23-bed critical access hospital in Yoakum, Texas, the priority has been on recruitment and retention of qualified staff, Miller said. That requires being transparent with your team about the importance of fiscal stewardship.
Matheis explained how the nonprofit health system has invested in its workforce with pay and benefit increases, as well as adding several thousand new employees. The organization also put together a 10-year workforce plan, even though Matheis acknowledged it could quickly become outdated in a ever-changing climate.
The operator of 88 hospitals across 26 states saw labor costs rise significantly, forcing it to get creative. By implementing new care models, Slubowski said, Trinity has been able to keep nurses who otherwise would have left the profession.
Dickson, who has experience as an emergency physician, revealed that the health system has implemented over 100,000 ideas from frontline workers over the 10 years he’s been at the helm. Embracing innovation has allowed the organization to find “new and better ways to do things.”
During his time guiding the rural health system, Ibrahim tried to take what he learned from the pandemic to strengthen the organization’s workforce. Addressing “weakened infrastructure that’s now become weaker” was critical to ensuring the sustainability of the organization.
Tampa General Hospital found financial success through curbing its reliance on agency staffing. Couris said the organization’s agency usage fell by 70%, allowing the health system to invest in its own workforce.
The South Florida-based nonprofit system slashed staff turnover and lowered utilization of agency nurse traveleres and outside contracts. Wester said he was impressed with how the organization “changed the narrative on our workforce.”
The recently-appointed CEO of the rural hospital shared his plans to get out of the red, which includes accounting for a hyper mobile workforce. Rather than completely eliminating reliance on traveling nurses and traveler tech position, Perras said the hospital must find ways to pay them to maintain high quality of care.
The new leader of the Atlantic County-based health system stressed that workforce was his main priority since taking over the position, but also offered his insight on CEO turnover in the industry. Charlton said “the pressures have just gotten overwhelming” for CEOs and that has contributed to resignations and retirements.
Healthcare may see more divestures and realignment going forward, says PwC.
After a decline in 2023, healthcare deal volumes may be on the rise in the coming year.
Financial headwinds such as interest rates and regulatory concerns have slowed down dealmaking, but thanks to factors indicating increased activity in the near future, the outlook for 2024 health services deals is “cautiously optimistic,” according to PwC.
The professional services firm’s deals outlook report noted that transaction volume through November 15, 2023, fell 13% year-over-year. However, 2021 and 2022 are considered outlier years for the record volume they experienced. When compared to the annual levels seen from 2018 through 2020, this past year’s volume was nearly twice the average.
“The declines in sector transaction volumes are consistent with the broader macroenvironment but remain generally in line with 2021 levels,” said Nick Donkar, US Health Services Deals Leader for PwC. “Non-traditional cross-sector partnerships continue to be a strategic focus of many health systems and strategic assessments persist in driving more divestitures and realignment in the sector. While financing challenges persist, the sector’s resilience continues to make it ripe for increased transaction volumes in 2024.”
Here are three deal drivers in 2024 highlighted by PwC:
Opportunistic funding
Though financial challenges persist, investors are finding creative ways to fund and execute deals. PwC reports that it has seen increased use of continuation funds and special purpose vehicles through which sponsors are exiting some of their equity.
Meanwhile, healthcare venture capital fundraising is on pace to exceed 2022 levels and private equity sector fundraising is flowing freely. Cash levels also remain significant, even if public valuations have underperformed.
Need for reinvention
Traditional providers and organizations are feeling the heat from disruptors, but it’s forcing them to strategize and identify ways to grow. More value is being placed on deals that invest in speed and resiliency to respond to convenient retail offerings.
Nonprofit organizations like health systems are cross-collaborating with for-profit entities in areas such as value-based care and less intensive services to shift care outside the hospital.
Regulatory effect
While increased regulatory scrutiny of deals has the potential to derail some transactions, other regulatory impacts could create opportunities for investment. For example, inadequate reimbursements rates coupled with reduced Medicaid enrollment and rising costs may put providers in a precarious position, making them targets for acquisition.
How regulations influence Generative AI is yet to be seen, however. Depending on how patent rights are shaped, GenAI could drive deal activity in its own right.
Healthcare is one of the industries facing increased scrutiny over dealmaking.
If it feels like healthcare transactions are under the microscope more now than ever, that’s because the Federal Trade Commission (FTC) is indeed cracking down to a level not seen in some time. Two decades, to be exact.
The regulatory climate hasn’t exactly slowed down the rate of hospitals agreeing to deals, but it is making life harder for organizations pursuing consolidation—a strategy that hospitals will continue to heavily explore heading into 2024 as they battle thin margins.
The FTC and Department of Justice (DOJ) released their Hart-Scott-Rodino Report, which revealed that 3,152 transactions were reported in the fiscal year 2022. That figure is the second-highest number of reported transactions over the past 10 years and more than 62% above the prior decade average.
Together, the FTC and DOJ filed 50 merger enforcement actions, representing the highest level of enforcement activity since 2001, when 55 merger enforcement actions occurred. The FTC alone accounted for 24 of the challenges in 2022: 11 in which it issued final consent orders after a public comment period, seven in which the transaction was abandoned or restructured as a result of antitrust concerns raised during investigation, and six in which the agency initiated administrative or federal court litigation.
In a statement to Congress regarding the report, FTC chair Lina Khan, joined by commissioners Rebecca Kelly Slaughter and Alvaro Bedoya, said: “The stakes here are real for the American people. We have heard from a wide breadth of people about how consolidation directly threatens their ability to live stable and secure lives.”
The FTC representatives pointed to the significant increase in transactions, as well as their complexity and scale.
“Transactions have also grown increasingly complex, in both deal structure and potential competitive impact,” they said. “Investment vehicles have changed, alongside major transformations in how firms compete in today’s economy. The size of mergers has likewise substantially grown.”
To help with the burden the level of activity is placing on the agency, the representatives asked Congress for additional resources and an update to the HSR Act. Specifically, the FTC wants to extend the 30-day window the agency is allowed to determine whether a deal warrants close investigation, along with the 30-day timeline after the merging parties certify they have “substantially complied” with the inquiry.
“Accordingly, these timelines are challenging in ordinary times given the agencies’ tight resources, and the recent deal surge has further underscored their inadequacy,” the representatives said.
Just days before releasing the report and statement, the FTC and DOJ issued their final 2023 merger guidelines to create a framework that more aligns with current M&A court rulings.
Retaining and attracting talent remains a priority for organizations.
Hospitals and health systems are finding ways to offer improved compensation and benefits to employees despite feeling the pressure to keep costs down.
As workforce turnover continues to plague organizations, hospital leaders are recognizing the value of investing in their staff with the thinking that the long-term dividends will outweigh the short-term costs.
According to a survey by Aon, 70% of hospitals implemented or bolstered sign-on bonuses in the past year, while 59% increased new hire pay, 54% increased their minimum wage scales, and 52% increased or added referral bonus programs.
The professional services firm released its annual Benefits Survey of Hospitals, which provides key findings for 160 health systems and 1,400 hospitals between April and June 2023.
The results also revealed that 62% of hospitals reported increased turnover among nurses, 41% experienced higher exits among non-physician clinical positions, and 22% dealt with physicians departing more often than the previous year. Turnover happened most often among staff with one to three years of tenure, the hospitals said.
Combating that level of turnover can feel like an uphill battle. With margins being thin and labor costs at the forefront of every CEO and CFO’s mind, hospitals leaders are getting creative to reward their employees in ways that are less detrimental to the bottom line.
Aon’s survey found that 95% of hospitals are offering tuition reimbursement programs, 93% are offering flexible work options, 84% are offering personal level, 80% are offering financial wellness/planning, 64% are offering gender-affirming benefits, 57% are offering enhanced behavioral health benefits, and 53% are offering paid parental leave beyond state and city mandates. A minority of the hospitals surveyed, meanwhile, are offering other premium benefits such as reduced hours for benefits eligibility (45%) and on-site daycare (28%).
Improving employees’ health benefits is another strategy organizations are pursuing. Of the hospitals surveyed, 82% aim to pay 76% or more of their workers’ healthcare costs, while 13% offer a no-cost health plan option to some of their employees.
Offering these types of benefits can be valuable for hospitals who are more restricted in their financial flexibility or are competing for talent in rural areas. Joe Perras, president and CEO of Cheshire Medical Center in Keene, New Hampshire, recently toldHealthLeaders that to survive as a rural hospital, his organization has to “kind of thread the needle and make sure that we can provide competitive wages so that we're not losing the limited staff that we do have to other folks in the market.”
Even with the efforts to keep their employees happy, hospitals remain concerned about their workforce heading into 2024. Two of the top concerns surveyed leaders have are offering competitive total rewards to attract and retain talent (85%) and increasing healthcare costs for the health system (85%).
Reconciling those concerns will continue to be a balancing act for hospitals for the foreseeable future.
