The divesture is one of several the health system pursued in 2023 to ease its finances.
Community Health Systems (CHS) was aggressive as a seller this past year in the face of financial turbulence.
The for-profit system's latest deal, a sale of three Florida hospitals to Tampa General Hospital for $294 million, closed earlier this month to give CHS additional resources as it attempts to claw out of the red in 2024.
In the transaction, 120-bed Bravera Health Brooksville in Brooksville, 128-bed Bravera Health Seven Rivers in Crystal River, and 124-bed Bravera Health Spring Hill go to Tampa General Hospital, along with their associated assets, physician clinic operations and outpatient services.
The move followed a string of sales by CHS in 2023. The system agreed to sell two North Carolina hospitals to Novant Health for $320 million in February before signing a deal to sell an El Dorado-based single hospital to South Arkansas Regional Hospital in April. CHS also completed a $92 million sale of a West Virginia hospital to Vandalia Health after agreeing to the transaction in January.
In the second-quarter earnings call with investors, CHS CEO Tim Hingtgen said the divestures "enable us to deliberately focus our resources in markets that we aim as most investable and that can produce greater growth and returns over the long term."
CHS will hope that by trimming down its portfolio and shifting its full focus onto key markets that it can turn around its margins heading into the new year.
The system's recent earnings report revealed it suffered net losses for the third-straight quarter, despite rising patient volume and efforts to bring down labor costs.
"Inflationary pressures continue to impact operating expenses and margins," Hingtgen said on the third-quarter earnings call. "While we remain highly confident in the potential of our overall portfolio, the growth in margin development opportunities in a small number of markets have been hindered in this rising cost environment. We are taking swift and necessary steps to mitigate these headwinds."
After signaling a desire to sell in 2023, CHS may not be done exploring opportunities entering the coming year.
The inaugural event is bringing together a diverse group of healthcare's finest in Austin, Texas.
The coming wave of healthcare leaders discussed the industry's foremost challenges and new approaches to tackling them at the first HealthLeaders UpNext Exchange.
Through day one at the two-day event in Austin, Texas, the 18 participating leaders shared their personal views and experiences dealing with the same pain points that are keeping CEOs, CFOs, and other c-suite executives up at night—but with a fresh outlook steadfast in its belief that the status quo is no longer enough.
The inaugural honorees consist of physicians, nurses, pharmacists, finance leaders, attorneys, and administrators representing organizations ranging from a 35-bed rural community hospital to a large regional health system with more than 80,000 employees.
Whereas other HealthLeaders Exchange events bring together leaders in the same role or discipline, the UpNext Exchange features a diverse group with voices in different areas of the industry, creating an environment rich with new thoughts and ideas.
Whether the topic was workforce, disruption, or technology, the leaders spent the first day stressing that the mindset for solving healthcare's biggest problems must evolve. In a post-COVID-19 world, the same strategies and way of thinking that may have worked in the past aren't necessarily the most effective now or going forward.
The pandemic has also put the entire industry on the defense or in crisis mode, which has hampered innovation. That reality forced the leaders to consider how they can get back to strategizing and revamping—while continuing to put out fires instead of waiting for them to dissipate.
Where and how technology fits into that was another major talking point, particularly in relation to the workforce. As the presence of AI and automation continues to grow, healthcare must find the most effective way to utilize that technology to supplement the workforce, not just replace it.
Stay tuned for more coverage of the UpNext Exchange, which will include ideas from day two in a full recap of the event.
The HealthLeaders Exchange is an executive community for sharing ideas, solutions, and insights. Please join the community at our LinkedIn page.
Join us for the next HealthLeaders Exchange!To inquire about attending a HealthLeaders Exchange event, email us at exchange@healthleadersmedia.com.
The 2024 HealthLeaders UpNext Exchange is sponsored by Collette Health.
The move is a strong strategic fit, but whether it will pass antitrust scrutiny is unclear.
A significant merger could be in the works between Cigna and Humana that would combine the payers into a force large enough to challenge its biggest rivals.
News of a stock-and-cash deal that could be finalized by the end of this year was reported by the Wall Street Journal, setting up a potential antitrust showdown with regulators. While the lack of overlap between the two payers' insurance businesses makes it more of a vertical consolidation and increases the chances of the merger passing, the pharmacy benefit manager (PBM) aspect of the deal could be a major sticking point.
Though Cigna and Humana are among the largest insurers in the country, their respective of areas of focus differs. Humana's bread and butter is Medicare Advantage (MA), in which its membership and market share are second only to UnitedHealthcare's, whereas Cigna has a much smaller footprint in MA and was already reportedly considering shedding that part of its business. The MA goldmine has begun to dry up with the reimbursement model changing and star rating system methodology shifting, leading to lower bonus payments.
Humana, meanwhile, is withdrawing from the commercial market to turn its full attention to its core lines of Medicare and Medicaid. By the time a merger with Cigna is completed, Humana could be completely out of selling employer group commercial medical products.
Due to the opposing directions the two payers have taken, the merger would not only be a hand-in-glove strategic fit by filling the gaps for each side, but it would also make a substantial argument for not infringing anticompetitive practices.
Regulators are more likely to view the deal as a vertical integration than a horizontal one, which increases the likelihood of the merger getting through. Horizontal deals have especially drawn the ire of the Federal Trade Commission (FTC) because of hospitals and payers strengthening their hold in business lines they already command a strong presence.
Cigna and Humana had previously discussed a merger in 2015, but that fell through before the latter reached a deal with Aetna that was blocked for violating antitrust laws. Cigna then agreed to a deal with Anthem, now known as Elevance Health, which also died due to an antirust ruling.
Aetna was later acquired by CVS Health in 2018 and allowed to pass because it was also considered more vertical. Cigna and Humana will hope that their deal will be seen in a similar vein.
Where the deal can be seen as causing antitrust issues is on the PBM side, where Cigna is one of the biggest players in the industry due to its ownerships of Express Scripts, which it acquired in 2018. Folding in Humana's pharmacy assets would give the combination an even greater market share and PBMs are already heavily scrutinized by regulators.
With regulators seemingly looking for any and every reason to put mergers and acquisitions in the healthcare space under the microscope right now, the PBM aspect of the deal may be the reason it falls apart.
If the deal passes, Cigna CEO David Cordani could be at the helm of the merging companies with Humana in the middle of a succession plan that will see Jim Rechtin take the reins from Bruce Broussard in the latter half of 2024.
The health system has reduced its number of full-time equivalents (FTEs) by not filling vacant positions, its CEO shared.
Baxter Health CEO Ron Peterson revealed that the Mountain Home, Arkansas-based health system is leaning into employee attrition to mitigate costs related to workforce.
There are advantages and disadvantages to utilizing attrition, which is why hospital CEOs must be careful how they do it, be transparent with their approach, and have a keen understanding of their employees to forecast how it will affect their workforce.
In an interview with local radio station KTLO, Peterson dispelled rumors of massive layoffs at Baxter Health and shared how it is using attrition to its advantage to remain financially viable as a rural system.
"We have been working very hard on trying to reduce our costs," Peterson said. "We've been looking since about July to try to reduce the number of FTEs, or the number of people working at the hospital. We've been able to eliminate through attrition, which means basically as somebody quits their employment at the hospital for whatever reason, if they retire, if they get a new job, then we don't refill those positions."
According to Peterson, Baxter Health has been able to not refill 155 of those vacant positions, contributing to less reliance on FTEs.
However, that strategy has created a need for Baxter Health to shift some employees around into new roles.
"Now what we're getting into is we need to restructure and reorganize, so we're asking some employees to not continue in their current position but to look at the positions that are open in the hospital and take something that they're qualified for in a different department or different area of the hospital," he said.
"It causes a little tension because employees are saying 'Oh, I don't have my job.' Really, we've notified those people and it's affected about nine people in the organization."
This approach to workforce challenges requires a buy-in and willingness from employees to not only fill different roles as needed, but potentially pick up additional responsibilities that would usually be reserved for those positions that are going unfilled. With burnout already being rampant in healthcare, putting more on the plate of your employees can quickly backfire.
Peterson said that the employees that have transfered to new roles have kept their seniority and benefits though, which could help Baxter Health retain those workers beyond the immediate future.
"We just find that our strength is in our people," he said. "We don't want to just lay people off, that's not our goal. We want to try to keep as many people as we can. That's why we're going through the process that we're going through the process we're going through versus a massive layoff."
Despite facing financial difficulties, Peterson stated Baxter Health has no interest in selling the hospital and wants to remain independent.
Making attrition work in its favor may allow Baxter Health to keep its doors open for now, but CEOs should be careful of delving into 'quiet cutting' territory. This is where transparency is vital and will be beneficial long term, even if making employees aware of your intentions means you will lose some in the process.
Advocate Health's chief medical officer shares what mindset to have in negotiations with payers.
Once you, as a provider, have made the decision to break free from the fee-for-service model to embrace value-based care, the challenge ahead is ensuring a contract that works for you.
Putting that contract in place requires a deft understanding of both what your organization needs and what the payer you're negotiating with requires. It can be delicate dance, but with the right approach and goals in mind, you can establish a sustainable value-based care model that offers better outcomes for you and your patients, says Advocate Health chief medical officer Gary Stuck.
Stuck recently joined the HealthLeaders Podcastand offered his advice to providers hoping to negotiate a value-based contract with a payer.
Here are three tips Stuck mentions to follow in negotiations:
Work together
There's often an adversarial relationship between payers and providers that can pull the parties in opposite directions, but value-based contracts will likely only succeed if both sides are getting what they want.
"The negotiation has to be a win-win because the next year it's not going to be sustainable if both parties don't succeed," Stuck says. "So it has to be a winner for the payer and a winner for the provider. Keeping that in mind, putting that on the table, being transparent about that, and then monitoring that, that's going to create year-over-year success to build on."
Assess
Secondly, evaluate your organization and know its limits. The contract has to be the right fit, not just aspirational.
"The other piece for a provider to look at is what current capabilities will drive success," Stuck says. "Is there something built into the incentive model that you're not going to be able to build quickly, or that you already have, in year one or year two? If so, you're going to be in trouble."
Prioritize
Speaking of aspirations, don't try to do everything in one contract. By narrowing your attention on key areas, you will have an opportunity to build off early success.
"Look within your own capabilities or what you could build in an efficient fashion to drive success and then just pick one, two, or three areas of focus because you can't change everything in your health system, or in your network, in a year," Stuck says.
An example Stuck highlights is Advocate Health focusing on reducing unnecessary skilled nursing facility admissions to cut down on long or unnecessary stiff stays, which he says patients and families didn't want.
"Just pick one or two of those areas of focus early on and do them really well, go deep, invest in those areas, knock it out, and have an early win."
The move comes after the agency indicated it may intervene in more acquisitions going forward.
In its latest enforcement of antitrust and competition policies, the Federal Trade Commission (FTC) has sued to halt John Muir Health's agreement to acquire San Ramon Regional Medical Center from Tenet Healthcare.
The agency's motion to block the deal, along with recent changes it made to its policy statements and merger guidelines, signal that M&A activity could be more scrutinized heading into 2024, potentially impacting the plans of health systems.
In the case of John Muir's deal, the FTC and the California attorney general's office jointly filed an administrative complaint in federal district court, with the FTC also seeking a temporary restraining order and preliminary injunction.
John Muir entered into the agreement with Tenet in January to acquire the latter's 51% stake in San Ramon Regional for $142.5 million, adding to its already-held 49% interest since 2013.
The FTC argued that with the deal, John Muir would control three hospitals in California's I-680 corridor that provide inpatient general acute care, allowing them to control more than 50% of the market. The lack of competition could lead to lower quality of care and higher prices.
"San Ramon Regional Medical Center has played an important role in ensuring Californians in the I-680 corridor have access to quality, affordable care for critical health care services, such as cardiac surgery and childbirth," Henry Liu, director of the FTC's Bureau of Competition, said in a statement. "John Muir's acquisition of San Ramon Medical would increase already high health care costs in the area and threaten to stall quality improvements that help advance care for all patients."
In response, John Muir stated it was disappointed by the FTC's decision and is assessing next steps, including challenging the decision in court.
"We believe the proposed acquisition would benefit our community, caregivers and patients, as well as John Muir Health, San Ramon Regional Medical Center, and Pleasanton Diagnostic Imaging," Mike Thomas, president and CEO of John Muir Health, said in a statement.
Increased scrutiny is here
The FTC had already been laying the groundwork for more challenges for M&A deals.
In the summer, the agency proposed changes to the premerger notification form and instructions, as well as the premerger notification rules implementing the Hart-Scott-Rodino Act. The FTC said the changes would enable it to "more effectively and efficiently screen transactions for potential competition issues with the initial waiting period, which is typically 30 days."
Then, the FTC announced the withdrawalof two policy statements related to healthcare market antitrust enforcement, which provided guidelines for consolidation. The FTC said the statements are "outdated and no longer reflect market realities."
It's clear the FTC is tightening its restrictions on mergers and putting deals under the microscope. How that will affect M&A activity is yet to be seen, but according to a recent HealthLeaders Mergers, Acquisitions, and Partnerships survey, 47% of healthcare executives said that state and federal regulations are affecting their M&A plans.
When asked if the regulatory climate is having the type of influence, Randy Davis, vice president and CIO at CGH Medical Center, told HealthLeaders: "From the perspective of a successful M&A plan, I would wholeheartedly agree with that. But from the perspective of, 'Is it driving M&A?' No, not at all. The regulatory climate does not, in and of itself, push M&A because those regulations are a given."
Where hospital transactions may have protection from increased FTC scrutiny is in states with certificate of public advantage (COPA) laws. For example, LCMC Health's recently secured a major win over regulatory requirements when a U.S. district judge ruled in favor of its purchase of three Tulane University hospitals from HCA Healthcare.
The ruling backed the power of state COPAs, which allow deals to avoid federal approval if they receive oversight from the state, which was present in LCMC's deal from the Louisiana Department of Justice. However, only 19 states currently have some version of COPA law.
Brendan Carr will succeed Kenneth Davis, who has been in the role for two decades.
Mount Sinai Health System has announced its succession plan at CEO by announcing Brendan Carr as the next leader of the New York City-based system.
Carr will take over from Kenneth Davis early next year, while the latter will transition to executive vice chairman of Mount Sinai's Boards of Trustees after serving as its CEO and predecessor since 2003. The move allows the system to chart its path forward under new leadership as it strives for financial stability.
Carr is currently a professor of emergency medicine for Icahn School of Medicine at Mount Sinai and chair of emergency medicine at the system. He joined Mount Sinai in February 2020 as its head of emergency medicine, following previous stints on the faculty at the Perelman School of Medicine at the University of Pennsylvania and as an associate dean of the Sidney Kimmel Medical College at Thomas Jefferson University. He also served the U.S. Department of Health and Human Services across multiple roles.
"Dr. Carr is a visionary leader and physician who will chart an exciting course for the Health System," Richard A. Friedman and James S. Tisch, co-chairmen of the Mount Sinai's Boards of Trustees, said in a statement. "We are certain that he will propel Mount Sinai to further success in our mission to provide compassionate patient care through unrivaled education, research, and outreach in the many diverse communities we serve."
Davis was expected to continue his CEO tenure through the end of 2024 after the system announced an update in September 2021, but the appointment of Carr ahead of schedule signals a change of direction for Mount Sinai.
Friedman and Tisch said: "We want to once again thank Dr. Davis for his remarkable and transformative tenure leading Mount Sinai for more than 20 years, and are delighted that we will continue to benefit from his wisdom in his new role."
Mount Sinai's decision to make the change may have been influenced by its financial challenge. In September, the system announced plans to close its Beth Israel facility in July 2024 due to mounting losses of $1 billion within the past decade. With patient volume dwindling, Mount Sinani said the Beth Israel campus is set to lose $150 million a year.
Fitch Ratings, meanwhile, downgraded the system this month from an 'A' to an 'A-', citing a weak 1.1% EBITDA margin through the first six months of the year and diminishing liquidity metrics.
"The weaker performance is being driven by ongoing challenges including elevated labor and supply cost, inadequate reimbursement to cover inflationary pressures, and increasing transfers to non-obligated entities," Fitch wrote.
Fitch also expects Mount Sinai's operating losses to grow before the end of the fiscal year.
The health system titan outlined its plans to continue growing during its first investor day in 20 years.
HCA Healthcare, already the largest health system in the country, is set to pursue a significant expansion to further solidify its hold in the market.
The hospital operator laid out its plans in its first investor day in 20 years, reflective of the organization's aim to go from "strength to strength," CEO Sam Hazen said. Those plans include investing billions of dollars to expand its service lines, increasing its market share in healthcare services from 27% to 29% by 2030, and targeting adjusted EBITDA growth of between 4% and 6% over the next five years.
HCA has $5.3 billion allocated for projects across the next two years, with about half ($2.7 billion) going to expansion and renovation, while $2 billion is earmarked for a roughly even spend on new inpatient and outpatient facilities, chief operating officer Jon Foster said.
Where the operator is focusing its growth efforts is in existing markets, such as Austin, Denver, and Nashville, where it is headquartered.
"We believe that where you compete is just as important as how you compete and we believe we are competing in the right markets," Hazen said.
On the inpatient side, HCA already holds the most or second-most market share in about 80% of markets, Foster said. The operator revealed it will continue investing in emergency services in the hopes of tightening its grasp, with 51 emergency departments under development after more than 100 were added in the last decade, said Richard Hammett, president of HCA's Atlantic Group.
For outpatient settings, Foster relayed that HCA wants to increase its locations from the 12 it currently has, to 20 within the next few years.
"For us, to be successful, we have to build networks that have local scale, they have to have local scope of services in facilities, and we have to integrate them into a cohesive network," Hazen said.
What HCA's leadership didn't touch on in its investor day was the operator's specific plans to combat the rising physician professional fees, which hampered the earnings of some of the biggest for-profit health systems in the third quarter.
Though HCA reported $1.08 billion in profit for the quarter—a slight dip from the $1.13 billion it brought in over the same period last year—it also saw its professional fee expense for contracted providers grow 20% year over year, CFO Bill Rutherford said on an investor call.
HCA's recent joint venture with physician staffing firm Valesco was meant to be an effective solution to mitigating costs, but the operator revealed that the partnership will lose the company around $50 million per quarter going forward.
While Rutherford said efforts are under way to salvage the partnership by reducing the cost structure, adjusting programming, and working with payers on reimbursement, HCA's finances may be hindered on two fronts for the foreseeable future—the losses from Valesco and the inflating physician professional fee.
The planned expansions, however, should allow the health system giant to maintain its position in the healthcare landscape.
This year saw leaders take over hospitals with an emphasis on strengthening their workforce.
It’s not an easy time to be taking over as a CEO at a hospital or health system.
A challenging climate though is causing organizations to churn over leadership and longtime CEOs to exit, creating opportunities for fresh faces in new places.
Here’s a look back at how four hospital CEOs took the reins this year and what their mindset was going into their new position.
Airica Steed
The CEO of Cleveland-based MetroHealth became the first woman, Black person, and nurse to take charge of the nonprofit health system near the turn of the calendar.
Steed was also thrust into the role after previous president and CEO, Akram Boutros, was fired for allegedly authorizing himself bonuses without disclosing it, meaning her transition was steeper than usual for a new CEO.
"I have hit the ground sprinting on rollerskates," Steed told HealthLeaders. "It's obviously not the norm in terms of a normal transition, but I'm still encouraged and motivated by it."
Tiffany Miller
At Yoakum Community Hospital, the succession of power was much smoother as Karen Barber ended a 30-year tenure with her retirement, paving the way for Miller to take over in January.
With Yoakum being a rural, 23-bed critical access hospital, Miller identified keeping the workforce strong as a major paint point.
"One of the biggest focus areas for Yoakum is the recruitment and retention of qualified staff; that starts with the culture of our hospital, especially given the current environment of higher labor costs," she told HealthLeaders. "It's about creating an environment where people not only want to be, but they also want to stay."
Joe Perras
Another rural hospital, Cheshire Medial Centner in New Hampshire, saw Perras selected to serve as president and CEO in the summer.
Perras inherited a difficult situation, with Cheshire having ended fiscal year 2022 with a -4.2% margin, $10.8 million in loss, and staff salaries $8 million over budget. Speaking with HealthLeaders, Perras shared how he planned to get the hospital out of the red through rural-specific strategies focused on recruitment and retention.
"There's no plan B for Cheshire County; we are the largest provider of healthcare for our county and serve as a regional referral center," Perras said. "We need to make sure that we shore up our finances, our clinical work, our service lines so that we can keep fulfilling this incredibly critical role for the region."
Michael Charlton
Elsewhere, New Jersey-based AtlantiCare Health System appointed Charlton as president and CEO after he served as a member of the AtlantiCare board of directors for more than 14 years, including six years as board chair.
Echoing what other incoming CEOs this year have said, Charlton highlighted workforce challenges as his and the health system's biggest focus in a conversation on the HealthLeaders podcast.
"We like to say here, 'what's your number one priority' and it's 'workforce, workforce, workforce,'" Charlton said.
As the healthcare industry heads into 2024, the new batch of CEOs will continue to have their hands full while a new wave of leaders enter the scene.
"The pressures have just gotten overwhelming," says one health system CEO.
Healthcare in a post-COVID world has been susceptible to workforce turnover and burnout, but that reality is also hitting those at the CEO level.
For hospitals and health systems, gradually improving but still tight margins are causing organizations to alter their strategy, resulting in churning over of leadership. Meanwhile, longtime CEOs are choosing to step aside and either enter a new chapter of their career or head into retirement.
Whether it's through consolidation, elimination, replacement, or resignation, the faces at the helm of hospitals and health systems are changing.
Through the first nine months of this year, 125 CEO changes took place at hospitals, according to a report from executive coaching firm Challenger, Gray & Christmas. That mark is a 67% increase from the 75 changes that happened over the same period in 2022.
In September alone, hospitals had 24 CEO changes—the second-highest number across the 29 industries and sectors measured in the report, trailing only government/non-profit (28).
What's causing these levels of CEO turnover in healthcare? The steady stream of economic and operational hurdles, said Michael Charlton, new president and CEO of AtlantiCare Health System, on the HealthLeaderspodcast.
"I think there's intrinsic factors when it comes to the CEO level," Charlton said. "Obviously you have the regulatory burden, you have the price pressures, you have the denials and the pre-authorization… there's a multitude of challenges."
Charlton is stepping into the role vacated by Lori Herndon, who retired in June to end a 40-year career at AtlantiCare. As both an incoming CEO and one that replaced a retiring veteran, Charlton is aware of how the current stressors are affecting entrenched leaders and creating opportunities for new ones.
The Challenger, Gray & Christmas report found that 318 CEOs across all industries retired this year, which made up 22% of all exits—slightly down from the 24% of CEO retirements last year.
"Sometimes when the deck is stacked against you in such a continuous manner, it gets hard to remember the purpose of why you're doing what you're doing every day," Charlton said.
"With all the pressures that the CEO faces, if there's an opportunity to transition out because we've had a very successful career over a long period of time and you feel that somebody is in a better position to serve the organization, that's a lot of it. The pressures have just gotten overwhelming."
How hospitals can respond
Refreshing leadership can often be beneficial for organizations, but having stability and continuity, especially at a time when turnover is high, can be a steadying force.
For example, Tampa General Hospital recently agreed to a 10-year contract extension with president and CEO John Couris after six years of service. The agreement created one of the only 10-year CEO contracts in healthcare.
"What they were thinking is how do we lock down a CEO that is probably at the apex of his career?" Couris said. "How do we create consistency, continuity, and stability in the organization? How do we create as much stability for the next decade as possible, given the fact that there's a lot of movement in the industry?"
Not every hospital can necessarily offer that kind of commitment, but there’s no reason why organizations can’t have a succession plan in place, whether that’s in preparation for a planned exit or to mitigate an unexpected change.
Identifying and developing leaders early can pay dividends later when an opportunity arises to advance in-house talent. Hospitals can evaluate not just the CEO position, but the entire C-suite annually to find out which executives have the potential to step up into the CEO role if the current CEO departs.
In the case of an upcoming retirement, tab a leader and have them work closely with the outgoing CEO to ensure a similar vision and approach is maintained in the new regime. In some cases, multiple C-suite executives may be nearing retirement at the same time. To deal with that, hospitals should get ahead of a massive changeover by attempting to stagger exits.
As for the CEO turnover that hospitals choose to create, organizations should be aware that a change in strategy may require a runway and allow their CEO the time and resources to see it through. Putting a CEO in the best position to succeed by surrounding them with the right leadership team and instilling confidence can mutually benefit both the CEO and the company.
Of course, even as the CEO position experiences change, other areas of the healthcare workforce remain in flux and that's something Charlton doesn't want to lose sight of.
Nurses and other clinicians continue to be vulnerable, which is why CEOs have had to manage the effects on their workforce while also dealing with it personally.
"We're all facing it," Charlton said. "It's just more magnified at the CEO level."