The previous two attempts by the financially troubled health system to sell Crozer fell apart.
Prospect Medical Holdings is hoping that the third time is the charm for its divestiture of Crozer Health.
The Los Angeles-based health system announced its plan to sell Crozer, including all hospitals, ambulatory surgery centers, clinics, and physician offices to a nonprofit consortium of healthcare operators.
Though the parties making up the consortium were not identified, Prospect stated that the proposed sale "will support the preservation and continuation of services to all members of the Delaware County."
Prospect also said in the announcement that it will work with the state of Pennsylvania to facilitate the move. State Sen. Tim Kearney, of Delaware County, toldWHYY News that details of the deal still have to be worked out and that he wants Prospect to fulfill its obligations to Crozer through its exit.
"By selling Crozer Health to a group of experienced healthcare operators, the communities in and around Delaware County will continue to access and receive the critical healthcare services they require," Tony Esposito, Crozer health CEO, said in a statement. "We appreciate the support of the Commonwealth of Pennsylvania, as well as all parties involved, to make this transition possible."
Four-hospital system Crozer is one of several divestitures Prospect is pursuing after filing for Chapter 11 bankruptcy last month.
Prospect first tried to offload Crozer to ChristianaCare Health System in 2022 before the deal fell through. It again tried to complete a sale with CHA Partners last year, but that proposal didn't reach the finish line either.
Elsewhere, Prospect is working to wrap up the sale of two Rhode Island hospitals, Roger Williams Medical Center and Our Lady of Fatima Hospital, to the Centurion Foundation.
Meanwhile, Prospect's deal with Yale New Haven Health for three Connecticut hospitals remains at an impasse with the sides embroiled in a lawsuit.
Prospect will seek bankruptcy court approval for the proposed sale of Crozer on February 6.
Supporting your staff in various ways is essential to solving challenges within the workforce, says one health system CEO.
Though healthcare is years removed from the pandemic, the industry's workforce continues to deal with residual effects that place immense pressure on hospital and health system staffs everywhere.
Amy Mansue, president and CEO of Inspira Health, shared with HealthLeaders three critical areas for executives to focus on to strengthen the workforce.
There's unpredictability around potential changes to programs and their impact, CEO Sam Hazen told investors.
As the Trump administration settles in, health systems are standing by to see how policy shifts could affect strategies for the rest of the year.
HCA Healthcare CEO Sam Hazen relayed some optimism, but also uncertainty, when asked by investors on a recent earnings call what the organization is anticipating for challenges around supply chain and public insurance programs.
The health system giant released its fourth quarter earnings, which reported $18.3 billion in revenue and $1.4 billion in net income. For comparison, HCA yielded $17.3 billion in revenue and $1.6 billion in net income over the same period in 2023.
The possibility of tariffs could put pressure on organizations' supply chain going forward, but HCA CFO Mike Marks stated that the system "has been working on tariff mitigation strategies for many years," including fixed price contracting, supply chain mapping, and risk assessment.
He noted that about 70% of HCA's supply spend for 2025 is contracted with firm pricing and that the system has diversified away from Chinese suppliers over the years.
"Like you, we are closely monitoring the announcements on tariffs from the new administration, including which countries are targeted, the rate of tariffs being implemented, and potential tariff exclusions for healthcare-related items," Marks said.
Hazen, meanwhile, highlighted the growth in exchange enrollment as a positive sign that the Trump administration will keep it around.
"We believe it's a positive outcome for families. It creates greater access to care. It improves outcomes," Hazen said. "So, all of that is a backdrop we think, politically, is a positive and presents an opportunity for the Trump administration, we believe, to sustain and ensure that families have coverage, they have affordability, and they have the opportunity to achieve positive outcomes for themselves and really for their family. So, we don't have any current insights into where this is going."
However, Hazen stated "it's too early for us to call anything" on the direction the administration will take enhanced Medicaid subsidies.
In terms of Medicaid supplemental payment programs for states, which could be nixed under Trump, HCA is still awaiting payments in Tennessee, with a wide range of estimation affecting 2025 guidance.
"When we consider all the various programs, noting the complexity and the variability and the moving parts, we are projecting and estimating that our net effect of supplemental payment programs will range between flat to 2024 to upwards of a $250 million headwind," Marks said.
The proposed $1 billion partnership aims to address healthcare challenges in Minnesota, the organizations announced.
A new integrated care model could be on the way in Minnesota.
Essentia Health and the University of Minnesota announcedthat they're working to create a nonprofit "all-Minnesota health system solution" that would receive $1 billion over five years to improve rural healthcare, increase access to specialty care, and reinvest in the university's medical facilities.
The organizations, which have yet to sign a formal agreement, didn't reveal if the proposed partnership is a merger or includes integration.
What the framework will do, according to the announcement, is provide more career and education opportunities for healthcare professionals, decrease clinical costs, allow for more innovative models, and advance technology across a large health system.
"This is the beginning of an exciting, ambitious — and critically needed — conversation about the future of care in our state,” Essentia Health CEO David Herman said in a statement. “Essentia Health has a long and committed partnership with the University of Minnesota. With nearly 70 percent of all Minnesota physicians having been trained at the University, we know that continuing to deliver excellent patient outcomes while building a sustainable healthcare future rests on the foundation of a strong medical school. These are key reasons why Essentia leadership has begun exploring opportunities to build a new framework for healthcare in Minnesota.”
The proposed partnership could also affect the University of Minnesota's relationship with Fairview Health Services.
The two sides signed a letter of intent last February for the university to buy back the University of Minnesota Medical Center from Fairview, along with renegotiating their affiliation as M Health Fairview, which was formed in 2018 and set to expire at the end of 2026.
An agreement, however, was not reached by the September deadline, putting their connection up in the air.
"We are at an inflection point in our relationship with Fairview Health Services that requires an urgent and innovative solution," University of Minnesota president Rebecca Cunningham said in the announcement with Essentia. "We envision this model as a new path forward in our relationship, one that builds on the momentum all those at M Health Fairview have built and that continues to put patients first, consistent with our organizations’ shared priorities. We have begun conversations and invite further discussion with Fairview to bring this concept to life for Minnesota."
On its end, Fairview said it became aware of the university's plans with Essentia shortly before the announcement and didn't receive details on the partnership.
"Over the last year, we have worked in good faith towards the university’s desire to purchase the academic assets," a Fairview spokesperson said in a statement. "Today's announcement by the university reflects a sudden change in their stated desire."
Essentia Health, meanwhile, is a year removed from calling off its merger with Marshfield Clinical Health System after the organizations agreed to form a 25-hopsital system in July 2023.
Minnesota Attorney General Keith Ellison, who reviewed the deal for compliance with state and federal antitrust laws, would also investigate a union between Essentia and the University of Minnesota.
Working with federal or state funded institutions is one way health systems can make the most of government influence, says Amy Mansue.
Regardless of size or stature, hospitals and health systems often improve their ability to tackle their biggest challenges and serve their community when they form local partnerships.
That strategy has benefited South Jersey-based Inspira Health, which has utilized those connections to strengthen its workforce and increase access to care for patients.
Some of Inspira's partnerships are with government-backed institutions, allowing the system to leverage government reach that's unlikely to be affected by potential policy changes as administrations turn over.
"The truth of the matter is that no one entity, no one hospital is going to be able to solve the healthcare issues of our communities alone," Inspira president and CEO Amy Mansue told HealthLeaders.
Mansue, who has been at the helm of Inspira since August 2020, believes provider organizations should understand how they can partner with federally qualified health centers (FQHC), for example. These federally funded nonprofit centers or clinics serve medically underserved areas, providing primary care services on a sliding fee scale.
For Inspira, the collaboration with public institutions Rowan University and Rowan College of South Jersey (RCSJ) has been particularly fruitful. The trio partnered to create the Pathway to Nursing program in 2023, which enables Inspira employees to have their fourth-year tuition at Rowan University paid in full by the system after they complete their first three years at RCSJ. Additionally, Inspira employees have received a 50% discount on tuition and fees for RCSJ's degree and certificate programs since 2022.
"We've done a lot of work with our local county college, trying to make sure that our staff have the ability to go back to school for free, encouraging that education component part of their career trajectory with us," Mansue said. "All of that helps our local community as well as helps each of us."
Inspira has also fostered a relationship with its academic partner, Cooper University Health Care. The pair formed Cooper and Inspira Neuroscience and Cooper and Inspira Cardiac Care to enhance local access to care in those two specialties.
According to Mansue, that commitment is significant for bringing physicians to Inspira's community.
"Part of that opportunity is just trying to keep things close to home," she said. "The less [the doctors] have to travel to the academic center, the better, and for the academic center, it works out great because they keep the high CMMI and then we have the ability to do new procedures at our facilities close to home that we otherwise wouldn't have had the opportunity to have."
Pictured: Amy Mansue, president and CEO, Inspira Health.
While these types of partnerships can provide health systems with some stability, a new presidential administration, on the other hand, can bring plenty of unpredictability.
Even in the case of President Trump serving a second, nonconsecutive term, Mansue doesn't think there's much leaders can take away from his first stint in office to prepare them for the coming four years.
Not only was a good chunk of his time spent on the pandemic, skewing his approach to healthcare policies, but his current administration also features new faces, bringing their own set of beliefs, Mansue highlighted.
Hospital and health system CEOs may not know how the government will act going forward, but keeping an open mind is how Inspira's guiding hand is operating.
"Obviously, every time a new administration comes in, they bring in new ideas, new opportunities," she said. "We are willing and really excited about the chance to work with new folks. At the end of the day, the federal government makes up about 39% of the spend of our national healthcare expenditures and so with all these new ideas, there's still the running of that operation, which is a huge responsibility.
"We all will step forward and partner with them in any way we can. We all understand that the economic pressure on healthcare costs are continuing, so I think we would continue to work with this new administration to think about new ideas and figure out how to create those opportunities for all of us to become more efficient."
Understanding the context in which hospitals and health systems are operating in is crucial for effective dealmaking.
In this episode of HL Shorts, Aspirus Health president and CEO Matthew Heywood provides insight on the changing economic landscape and its impact on the approach to hospital M&A.
The agency's new chair, unlike his predecessor, stated that the situation had little to do with private equity ownership.
The Federal Trade Commission's settlement agreement with Welsh, Carson, Anderson and Stowe highlighted the difference in perspective on private equity antitrust enforcement between the agency's outgoing and incoming chair.
While FTC commissioners voted 5-0 to accept the settlement, Lina Khan and her successor Andrew Ferguson diverged in their statements on their decision, with the former striking a critical tone of private equity and the latter downplaying its relevance in the matter.
The deal reached with Welsh Carson includes no monetary penalties or admission of wrongdoing, but freezes the private equity firm's investments in U.S. Anesthesia Partners (USAP) at current levels and reduces its board representation to a single, non-chair seat. Welsh Carson will also be required to obtain prior approval from the FTC for any future investments in anesthesia nationwide, as well as for certain acquisitions by any anesthesia group majority-owned by the company nationwide. Finally, the firm will have to provide a 30-days advance notice for certain transactions involving other hospital-based physician practices nationwide.
The agency sued Welsh Carson and USAP in September 2023 for an alleged anti-competitive scheme of rolling-up anesthesia groups in Texas.
However, a federal judge removed Welsh Carson from the case in May 2024, deeming that firm was not liable due to its minority stake in USAP.
Before reaching the settlement, the FTC threatened Welsh Carson with a separate administrative antitrust case, forcing the firm's hand.
"In a last-minute effort to claim a political victory, the outgoing FTC leadership threatened to relitigate in its captive administrative court the exact same overreaching claims that were dismissed last year by an independent federal judge unless we agreed to a settlement by Inauguration Day," Welsh Carson said in a statement. "Despite our confidence in prevailing again in any repeat of this case, we made the decision to agree to a benign notice settlement that will not affect our business in any respect and involves no admissions of wrongdoing or monetary penalties. This allows us to put a politically motivated matter behind us and avoid additional expense and distraction. At WCAS we remain most proud of our reputation and legacy of being a private equity firm of the highest integrity."
In her statement, Khan pointed to tactics used by private equity firms to prioritize their own profits over providing quality, affordable care.
“Like other private equity firms, Welsh Carson uses a complex maze of related entities and funds to carry out its business," she wrote. "Indeed, the Commission's complaint in this matter identifies no fewer than seven different Welsh Carson affiliates as defendants, including two separate private equity funds."
Ferguson, meanwhile, released his own statementin which he pushed back on the significance of private equity involvement in the case.
"The press release and the chair's statement both suggest that this case is extraordinary because it involves 'private equity' and 'serial acquisitions,' and hint at antipathy toward private equity. I write to pierce through this breathless rhetoric to make clear that this case is an ordinary application of the most elementary antitrust principles," Ferguson wrote.
"That Welsh Carson is a private equity firm is irrelevant; the antitrust analysis would be the same if Welsh Carson were, for example, an individual or institutional investor. Section 7 prohibits mergers that may substantially lessen competition or tend to create a monopoly. In most of our Section 7 cases, we are predicting the likely effects of a transaction before it takes place. Here, however, we did not have to predict anything. Welsh Carson made acquisitions. As alleged in the complaint, those acquisitions demonstrably created monopoly power and Welsh Carson wielded that power to raise prices. That is exactly what Section 7 prohibits anyone from doing. There is thus no reason for the commission to single out private equity for special treatment."
Under the Trump administration, regulatory oversight of M&A is expected to ease up, especially as it relates to private equity.
Ferguson's explanation of the decision to settle with Welsh Carson provides insight into how the FTC may hold private equity companies accountable going forward.
A new report examines the dynamics of dealmaking in the healthcare innovation landscape.
As venture funding for digital health startups has dipped in recent years, the market has created an environment where big and smaller players are vying for investments.
In 2024, there was an increased focus on earlier-stage funding, along with more modest later-stage check sizes, while larger companies made major moves to round out activity, according to a report by Rock Health.
Venture funding for U.S. digital health companies totaled $10.1 billion across 497 deals last year, continuing the decline from $10.8 billion (503) in 2023, $15.7 billion (594) in 2022, and $29.2 billion (740) in 2021.
When adjusting for inflation, 2024's total approximates to $8.3 billion, which nearly matches the $8.2 billion raised in 2019—the report's benchmark year before the pandemic fueled a heavy funding cycle.
One reason for the decreased funding levels last year was companies choosing to invest in younger startups. Sixty three percent of funding rounds were labeled, compared to 57% in 2023, and of the labeled deals, 86% supported startups raising their Seed, Series A, and Series B rounds.
Another factor in funding trends is smaller check sizes for companies that raised later-stage rounds. Median deal sizes for Series C and D fundraises in 2024 were $50 million and $55 million, respectively, compared to $62 million and $58 million in 2023.
There were also fewer mega deals, or fundraises over $100 million, which made up 21% of last year's funding versus 32% in 2023, 38% in 2022, and 56% in 2021.
Still, deployable capital is being concentrated at the top by the heaviest hitters, the report highlighted. Andreessen Horowitz and General Catalyst were the digital health's top investors last year, based on disclosed investor syndicates, and captured 20% of committed LP capital in the venture market, according to PitchBook.
"David and Goliath dynamics in digital health came into sharper focus in 2024, aligning with broader venture and healthcare industry trends and reflecting the natural layers within technology stacks," the Rock Health report's authors wrote. "We believe a balance of big and small players will be needed to preserve diversity of thought and innovation in healthcare."
The industry is seeing new highs in areas of dealmaking that illustrate recovery is ongoing.
Although hospitals' and health systems' margins have largely stabilized, dealmaking trends reveal that many organizations are still dealing with financial challenges.
Health systems are divesting at a record rate due to financial distress, forcing larger organizations to increasingly seek out partnerships, according to a report from Kaufman Hall.
The analysis found that 45 of the 72 announced transactions in 2024 (62.5%) involved a divestiture, more than doubling the mark of 31.1% for 2023 to set a new high for the industry.
Nearly a third of the deals (30.6%) featured a financially distressed party, topping the previous record of 27.7% from 2023.
It isn't just smaller hospitals that are making up these types of transactions either. The average seller size by annual revenue involved in financially distressed deals last year was $401 million, which nearly doubled the high of $219 million from 2022. The total transacted revenue for those moves was $8.8 billion, compared to $2.3 billion for the previous year.
Meanwhile, mega-mergers are evolving to include more deals between a larger organization and a party of significantly lesser size, the report highlighted. Examples of this in 2024 included Risant Health's acquisition of Cone Health, HATCo's planned acquisition of Summa Health, Nuvance Health's planned merger with Northwell Health, and Sanford Health's merger with Marshfield Clinic Health System.
“While these may not all involve financially distressed organizations, it does suggest that large organizations are not immune to financial and operational challenges—a trend to monitor in 2025," Anu Singh, managing director in the Mergers & Acquisitions Practice at Kaufman Hall, said in a statement.
A major focus of health systems pursuing divestitures currently is market realignment. In 2024, a record 62.5% of transactions featured market reorganization, which is allowing regional health systems capable of taking advantage of these sales to achieve growth.
Analysts also noted that transformative partnership models, such as the ones led by General Catalyst's HATCo and Kaiser Permanente's Risant Health, should have a greater presence going forward as health systems search for innovative ways to tackle industry challenges.
Increased M&A activity in general is expected this year due to a potentially loosened regulatory climate. A recent report by PwC forecasted that a pro-business stance by the new presidential administration could cool regulatory pressure, clearing the way for more deals to be pursued and completed.
A new report by the Biden administration examines the negative impact of two oft-criticized trends in the industry.
Three federal agencies have issued warning on the potential damage unchecked consolidation and private equity ownership can wreak on healthcare.
Following a year-long investigation, the Federal Trade Commission (FTC), the Department of Justice, and HHS released a report that highlighted concerns regarding the consequences of increased consolidation and private equity investment on patient care.
The report comes after a tri-agency collaboration was announced in December 2023 and a request for information (RFI) was released in March 2024. It contains over 2,000 comments submitted from patients, physicians, health systems, insurers, industry associations, labor unions, and academic researchers.
The comments, as well as the agencies, posit policy considerations that create more ownership transparency, strengthen regulatory enforcement, and lower reporting thresholds for M&A.
"The results from this RFI indicate plainly that the American public is dissatisfied with ongoing trends in the health care sector," the report stated.
Provider consolidation continues to trend upward, the agencies noted. In 1990, 65% of Metropolitan Statistical Areas in the country were considered highly concentrated for hospital services. That number rose to 90% in 2016.
Often as a result of integration, higher prices are charged to insurers and patients, while care quality drops.
Provider M&A that involves private equity can come with its own set of challenges and repercussions. The report said that private equity's presence in healthcare is widening, with more than 40% of the country's emergency rooms estimated to be run by staffing companies owned by private equity firms, as an example.
The agencies cited case studies of private equity firms leaving hospitals in financial ruin after taking out profits. Just this month, Prospect Medical Holdings filed for Chapter 11 bankruptcy, which a Senate report found was due in large part to its former private equity owner, Leonard Green & Partners, extracting $424 million in dividends and preferred stock redemption while engaging in a $1.55 billion sale-leaseback deal.
"PE ownership in health care appears to present new and unique risks related to and apart from consolidation," the tri-agency report said.
Respondents to the RFI urged for policies that clamp down on anti-competitive consolidations and more transparency of private equity acquisition activity, such as expanding the CMS nursing home ownership transparency rule.
Commentators also suggested that the financial threshold for reporting M&A to the FTC or DOJ be lowered past the $119.5 million it currently sits at.
"It is clear from the commentors that the Agencies’ past actions have not sufficiently addressed the harms inflicted by anti-competitive activity in the health care sector, and more effective and vigorous antitrust enforcement is necessary to stop or reverse the trend of consolidation," the report stated.
