The buyer, WoodBridge Healthcare, was unable to finance the purchase of Commonwealth Health System.
Community Health Systems has been an eager seller this year, but roadblocks continue to block the hospital operator's path to divestitures.
In the latest hang-up, CHS and WoodBridge Healthcare have mutually agreed to terminate their agreement for the sale of three-hospital Commonwealth Health System due to a lack of funding to complete the deal.
Ziegler, the investment banking firm WoodBridge retained for the transaction, was unable to sell the bonds required to fund the acquisition, the nonprofit health system saidin a release.
The sale, which was announced in July for $120 million and expected to close in the fourth quarter, involved three Pennsylvania hospitals: 186-bed Regional Hospital of Scranton, 122-bed Moses Taylor Hospital in Scranton, and 369-bed Wilkes-Barre General Hospital in Wilkes-Barre.
“The entire WoodBridge team is extremely disappointed in this outcome,” Joshua Nemzoff, WoodBridge chairman of the board, said in a statement. “We very much looked forward to being part of the Scranton and Wilkes-Barre communities and partnering with the Commonwealth Health staff and physicians on providing the best healthcare in the region. CHS has gone out of its way to help get this deal done including significant concessions on their part. We appreciate all their efforts to do so.”
In the wake of the transaction falling apart, Franklin, Tennessee-based CHS said it will evaluate further options for Commonwealth Health.
The move was meant to be part of the for-profit system's plan to yield more than $1 billion in divestitures to boost its finances.
It's also the second deal that has come undone in recent months, with the first being the sale of two North Carolina hospitals to Novant Health for $320 million. That transaction faced regulatory pushback before Novant eventually called off the acquisition after the Federal Trade Commission was granted an emergency injunction to block the deal.
However, CHS has continued to be active in the market and inked more agreements to sell off assets.
Last month, the operator announced a $265 million deal with AdventHealth for Florida-based ShorePoint Health System, expected to close in the first quarter of next year.
More completed divestitures should offer CHS some relief as it works its way out of financial instability.
In the third quarter, the system reported an operating loss of $205 million and a net loss of $391 million, a sharp decline from the $173 million in operating income and $91 million net loss over the same period last year, respectively.
Higher patient volumes have been essential to the nonprofit's improving finances, but they're also leading to more expenses.
Providence suffered its first negative operating quarter of the year for the three months ended Sept. 30, slowing down the momentum from its financial turnaround in the first half of 2024.
The Renton, Washington-based health system posted an operating loss of $208 million in the third quarter, marred by a jump in labor and supply costs as a result of an increase in patient volume.
While the operating loss was an improvement on the $310 million loss (-4.3% margin) during the same period last year, it was a significant downturn from the $53 million in operating income reported in the second quarter.
Providence also generated $176 million in operating income in the first quarter, which was indicative of the nonprofit steering out of the red and gaining financial stability.
Though higher admission volumes boosted revenue to the tune of a 5.7% increase to $7.6 billion in the third quarter, they also pushed operating expenses up 4% to $7.8 billion.
Salaries and benefits rose 4% year over year, whereas supplies ballooned by 8% over the same period, due in large part to a 12% increase in pharmaceutical costs.
Providence pointed to positive trends in patient volume, reimbursement, lengths of stay, and dependency on contract labor as reasons for optimism going forward.
“While macroeconomic pressures persist, including the national shortage of health care personnel and the rising cost of drugs and supplies, Providence has stayed the course on our renew and recover strategies, and as a result, our operating performance continues to improve in many of our local markets," Providence CFO Greg Hoffman said in a statement.
Within patient volume for the third quarter, inpatient admissions and case mix adjusted admissions both increased by 4% year over year, while acute adjusted admissions increased 5%, physician visits increased 4%, and home health visits increased 2%.
Through the first nine months of the year, Providence experienced an operating loss of $155 million and a net income of $310 million, compared to losses of $857 million and $613 million over the same period last year, respectively.
A variety of moves in the past 12 months, both completed and unresolved, shaped the market and set the tone for dealmaking in 2025.
The hospital M&A market experienced a bit of a push-pull effect this year with increasing financial pressures motivating organizations to pursue transactions while ramped-up regulatory scrutiny created a more challenging environment to complete deals.
Activity is expected to be robust in 2025 as health systems continue to realign portfolios, turn to partnerships to help shoulder financial burden, and explore non-traditional, multi-organizational ventures.
Here's a look back at five deals involving hospitals and health systems that defined M&A this year.
Steward Health Care
It's impossible to tell the story of 2024 dealmaking without mentioning Steward Health Care's impact on the market.
The Dallas-based system filed for Chapter 11 bankruptcy and put all 31 of its U.S. hospitals up for sale in May, which led to a number of transactions taking place over the course of the year.
In the third quarter alone, Steward was involved in 11 of the 27 hospital M&A deals in the industry, according to a report by Kaufman Hall, including multiple facilities in Massachusetts switching hands.
General Catalyst and Summa Health
The year started with a big swing by General Catalyst, which made good on its promise to buy a health system by tabbing Summa Health for its business spinoff Health Assurance Transformation Corporation (HATCo).
The venture's stated goal of transforming healthcare by testing and implementing new technology was met with some skepticism within the industry, but Summa Health CEO Cliff Deveny and HATCo CEO Marc Harrison believe the partnership is a worthwhile attempt at pushing the bounds.
"We can't keep merging inefficient health systems into other health systems because then the problems just get compounded," Deveny told HealthLeaders.Top of Form
Risant Health and Cone Health
After completing its purchase of Geisinger Health, Risant Health once again dipped into the market by signing on to add Greensboro, North Carolina-based Cone Health to its value-based care network.
Kaiser Permanente's subsidiary said it was looking to acquire "four to five" more systems over the next half-decade following the Geisinger sale and with Cone, Risant can enter a new market while also operating a health plan.
Risant's next health system acquisition, which could come in 2025, is expected to have similar characteristics as Geisinger and Cone.
Longitude Health
One of the ventures that raised eyebrows this year was the formation of four nonprofit health systems to create a for-profit entity in Longitude Health.
Baylor Scott & White Health, Memorial Hermann Health System, Novant Health, and Providence are teaming up to pool their resources and launch operating companies, initially focused on pharmaceutical development, care coordination, and billing.
While those three areas are in need of solutions, they're also filled with players that will provide stiff competition, according to Josh Berlin, CEO of strategic healthcare advisors rule of three.
Yale New Haven and Prospect
The seemingly never-ending saga between Yale New Haven Health and Prospect Medical Holdings is a prime example of how a deal can go sour after an agreement is reached.
After Yale New Haven agreed to buy three Connecticut hospitals from Prospect for $435 million in 2022, the two sides have been locked in a dispute over the conditions of the transaction that continues to play out in the public and in court.
If the parties can't meet in the middle to complete the deal soon, it could have negative effects on their strategic maneuverability, and more importantly, patient care.
Providers need to understand what millennials and Gen Z are looking for from their workplace experience.
As healthcare's workforce changes, so too must hospital CEOs' approach to recruiting and retaining the clinical and non-clinical staff of tomorrow.
This month's HealthLeaders cover story explored the generational differences that are putting pressure on decision-makers to meet the needs of a diverse workforce.
Here are three tips to meeting those demands, especially of the youngest generations, from Crouse Health CEO and HealthLeaders Exchange member Seth Kronenberg, AdventHealth CEO Terry Shaw, and University Health CEO Ed Banos.
The HealthLeaders Exchange is an executive community for sharing ideas, solutions, and insights. Our exchange program hosts a CEO Exchange annually.
The company said its financial turmoil partly stems from Steward Health Care's own troubles.
The list of healthcare provider bankruptcies this year has now grown to include Miami-based CareMax.
A combination of factors, including increasing expenses and its relationship with Steward Health Care, led the organization to file for Chapter 11 bankruptcy, according to a filing with the U.S. Bankruptcy Court for the Northern District of Texas.
CareMax, which serves approximately 260,000 patients annually and employs around 1,100 employees across 46 clinical centers, listed debts of $693 million and assets of $390 million in the filing.
In the lead-up to bankruptcy, the company suffered a net loss of $683.3 million for 2023 before experiencing a loss of $170.6 million in its most recent earnings report for the second quarter.
As part of its restructuring process, CareMax will sell the Medicare Shared Savings Program portion of its management services organization to Revere Medical, formerly known as Rural Health Group and backed by private equity firm Kinderhook Industries.
Revere Medical also finalized the acquisition of Steward’s physician group, Stewardship Health, last month, signaling its interest in distressed assets.
Steward’s own bankruptcy influenced CareMax’s financial downturn, the company’s chief restructuring officer, Paul Rundell, outlined in the filing.
After acquiring Steward’s Medicare value-based care business in 2022, CareMax served as the exclusive value-based management services organization across Steward’s Medicare network. However, Steward filed a motion to reject its business relationship with CareMax this summer when it filed for chapter 11 bankruptcy.
Beyond Steward, CareMax struggled with swelling costs from leases, rising interest rates, changes in regulatory reimbursement, inflation, rising labor and operational costs, and high levels of medical utilization following the pandemic.
“This confluence of economic factors constrained CareMax’s ability to raise new capital as a crucial moment for the newly expanded enterprise, which left the Company with limited options to address its funded debt obligations,” Rundell said in the filing.
Several providers have felt the weight of the current financial climate and entered bankruptcy recently. CareMax competitor Cano Health filed in February after the Miami-based provider had difficulty generating profit from its Medicare Advantage business.
A recent report by Gibbins Advisors, however, showed that healthcare bankruptcies are in decline overall. Through the first six months of this year, the report tracked 29 filed bankruptcies, which followed 79 cases in total for 2023.
The drop in volume is driven by fewer cases involving middle-market companies with liabilities ranging from $10 million to $100 million, Gibbins stated.
It's incumbent on hospital leaders to address the concerns of all their employees to ensure a sustainable workforce.
For hospital and health systems CEOs, recruitment and retention efforts with the current workforce require more than a one-size-fits-all approach.
As many as five generations make up clinical and non-clinical staff at organizations, putting the onus on decision-makers to understand the various factors that are driving workers to switch jobs or exit the industry.
The youngest generation could see the biggest exodus in the near future, with 22% of Gen Z (ages 18-27) reporting they plan to leave healthcare within the next three years, according to a report by Soliant Health.
The number one reason Gen Z cited for departing healthcare is an unhealthy workplace environment and culture (14.1%), which was also the leading cause for surveyed workers ages 44-59 (20.6%) and 60-plus (23.7%).
High levels of job stress or burnout were other significant drivers for ages 44-59 and 60-plus, at 19.9% and 19.1% respectively, but less of a concern for Gen Z (9.4%).
Meanwhile, ages 28-43 cited high levels of job stress or burnout as their main issue (19.1%), followed closely by poor work-life balance (17%).
When it comes to reasons for choosing a job, salary and benefits were top of the list for all generations, with ages 44-59 (25.3%) and 60-plus (25.5%) ranking them highest.
Work-life balance was most important to ages 28-43 (21%), while career advancement opportunities were more relevant for ages 18-27 (15.9%).
One area that the youngest generation showed significantly more interest in was technology and tools available for the job, which, at 7.3%, was at least more than double any other age group.
The different preferences and motivators among generations means organizations need to expand their offerings to appeal to as many people in their workforce as possible.
Check out this month’s HealthLeaders cover story to learn how hospitals CEOs are fighting the multigenerational war within their own walls.
CEOs should prioritize an area that workers say is their top concern yet doesn't receive enough attention.
It’s not a secret that improving your workers’ wellbeing gives you a better chance at keeping them. However, there’s a disconnect between the type of wellbeing that employers are providing and the kind employees want more of.
Financial wellbeing was identified as the priority for workers surveyed by global advisory, broking, and solutions company WTW, despite it being the most underserved area by employers, highlighting the need for organizations to rethink the benefits they offer.
WTW fielded responses from 535 U.S. employees working at medium and large private sector companies in various industries from March to April 2024.
While two-thirds of workers (66%) said financial wellbeing is their top concern, it ranked the lowest for employer priorities (23%). More employers are focused on supporting mental (73%) and physical wellbeing (50%), which also matter to employees, but not nearly as much as financial wellbeing initiatives.
Nearly half of employees (48%) deal with moderate or major issues in at least two areas of their wellbeing and 41% report that their financial situation is the area of wellbeing they face the biggest challenges, according to a separate WTW survey on global benefits attitudes. By addressing what workers are seeking with their wellbeing, organizations can combat burnout and increase engagement, resulting in higher retention rates.
Some of the ways surveyed employers are striving to improve employee financial wellbeing are:
Offering navigation and decision support to help maximize programs in place
Offering coaching to help build financial resilience skills
Educating employees on the various financial issues they may face
Offering personalized financial decision support
Addressing affordability through a total reward lens, looking at health, risk and retirement benefits, as well as pay, and connecting their strategy to DEI goals
Though CEOs need to make up ground on financial wellbeing, many organizations are beginning to recognize the importance of the employee experience as an outcome of wellbeing strategy. More than a third of surveyed employers (37%) said they are looking to make wellbeing a foundational element of their human capital strategy in the next three years, compared with just 11% currently.
How wellbeing initiatives are communicated and linked to company culture can also be determining factors for success, which is why employers should continue to evaluate if they’re meeting the diverse needs of their workers and reaching as many employees as possible.
A new report by PitchBook highlights how privae equity dealmaking is faring across the industry.
Private equity’s activity in healthcare services in the third quarter was diminished.
An estimated 148 private equity deals were announced or closed in the quarter, a drop-off from the 185 deals in the second quarter, as investors turned their attention to other sectors, according to a PitchBook report.
Despite the downturn, which is on pace to result in a deal count for the year that is 15% below 2023 levels, the market data provider continued to stand by the prediction it made in the previous quarter that private equity investing in healthcare services hit a “turning point.”
“We are standing by that call, although we are still waiting for the resulting deal announcements as processes drag on and sponsors try to time the market,” Rebecca Springer, lead analyst for healthcare at PitchBook, wrote in the report.
Regulatory pressure and high interest rates, along with price differences between buyers and sellers, have cooled the market and brought down activity from the highs of 2021.
PitchBook anticipates investments to increase at the end of the year with dealmaking timelines extended, but noted that growing optimism among buyers and sellers in the second half of 2024 is being directed toward healthcare IT and pharma services.
Within healthcare services, areas that are seeing the most sponsor demand and interest, which include medspa and outpatient mental health, have a shortage of platform-scale assets, the report stated.
Two larger platform trades in applied behavioral analysis earlier this year should be a precursor for more deals there, while home-based care should still have some buzz.
Though investors have recently shied away from physician practice management companies, PitchBook expects to see the market pick up a bit partly due to regulatory concern stabilizing.
The report also said that the Medicare Advantage market drying up is causing struggles for value-based primary care assets, such as Cano Health and Clinical Care Medical Centers. The former filed for bankruptcy earlier this year while the latter followed suit in October.
The deal is expected to generate around $1.2 billion in revenue for Prospect, which adds a partner willing to invest in delivering care.
Astrana Health has had made its latest bid to add to its expanding portfolio.
The technology-driven company has entered into a definitive agreement to buy certain assets and businesses from Prospect Health System for $745 million to continue building out its integrated healthcare delivery platform.
Astrana will acquire Prospect Health Plan in California, Prospect Medical Groups in California, Texas, Arizona, and Rhode Island, management service organization Prospect Medical Systems, pharmacy asset RightRx, and Tustin, California-based Alta Newport Hospital, doing business as Foothill Regional Medical Center.
To fund the transaction, which is expected to close in the middle of 2025 if it passes regulatory approval, Astrana stated it will use cash on hand as well as a $1.1 million senior secured bridge commitment.
Astrana, which rebranded from Apollo Medical Holdings earlier this year, has been active in acquiring companies that fit its value-based care arrangements.
In October, the company close its deal for Collaborative Health Systems, a management services subsidiary of Centene.
The pieces of Prospect that Astrana is obtaining allow it to round out its care delivery and management service organization offerings, while bringing in Prospect’s approximately 610,000 members across Medicare Advantage, Medicaid, and commercial lines of business onto its platform.
“Prospect's established presence in key markets also opens new opportunities for Astrana, particularly in geographically adjacent Orange County, California, where we today have limited operations,” Brandon Sim, president and CEO of Astrana, said in a statement. “We believe this acquisition continues to solidify Astrana as our nation's leading healthcare delivery platform, enabling us to deliver technology-driven, longitudinal, and patient-centered care to an estimated combined 1.7 million members across the country."
In its third quarter earnings, Astrana reported total revenue of $478.7 million, which was up 37% from the $348.2 million reported in Q3 2023. Net income, meanwhile, was $16.1 million, down 27% from $22.1 million over the same period last year.
For Prospect, the transaction is expected to generate around $1.2 billion in revenue with expected adjusted EBITDA of $81 million for the 12 months ending December 31, according to the announcement.
Astrana said it will significantly invest in Prospect and its infrastructure to improve access and quality of care for local communities.
"We are excited at the opportunity to partner with Astrana to build a larger, stronger, and more coordinated care delivery network which we expect will benefit our communities by increasing access, quality, value, and efficiency,” Jim Brown, CEO of Prospect, said in a statement.
Making financially-sound decisions to fortify the workforce requires proactivity and discipline.
The financial toll of the workforce crisis facing healthcare is placing immense stress on the bottom lines of hospitals and health systems.
Labor costs are high and continue to rise as a result of recruitment and retention efforts to mitigate employee turnover, which continues to plague organizations in the current climate.
Executives spanning the C-suite got together in Washington, D.C. at the recent HealthLeaders Workforce Decision Makers Exchange to shares ideas on how to improve ROI with the workforce. Here’s what they said.
Taking risks with technology
Whether it’s AI or virtual nursing, leaders should be welcoming technology into the workplace to improve efficiency, attract talent, and combat burnout.
Investing in technology means pouring financial and operational resources into solutions without knowing for certain that the direct ROI will be there, especially in the short term, but organizations can’t afford to be risk-averse with battling workforce shortages.
The technology doesn’t even need to be outside-the-box. “We’re chasing bells and whistles” instead of trying to solve for areas like clinical and administrative burden, said Praveen Chopra, chief digital and information officer for Emplify Health.
Solutions like ambient listening tools to automate transcribing not only reduce time spent on tasks for clinicians, resulting in fresher workers, but allow for that extra time to be used more effectively instead of cramming in more time for patients.
Virtual nursing can also be a valuable investment to provide flexibility for nurses wanting more optionality.
Sharla Baenen, chief operating officer at Emplify Health, Bellin region, said that her organization wanted to use virtual nursing to become a destination workplace. However, measuring its impact wasn’t so clear. On the clinical side, Bellin focused on decreasing vacancy rates and the length of stay and saw that those targets were being met. From a workforce perspective, ROI can be quantified through recruitment and retention rates, and qualified through nurse engagement, which Baenen shared has gone up.
Regardless of the technology providers are considering though, clinicians should be involved from the get-go in the process of designing solutions that are easy to use and don’t require extensive training—another clinical and administrative burden. How clinicians are educated and re-educated on using technology can often make-or-break whether the juice is worth the financial squeeze.
Managing labor resources is critical for organizations right now with 40 cents of every dollar going towards labor, said Mike Marquardt, CFO of UVA Health System.
Leaders should look at a holistic approach to the workforce, with CFOs needing to partner with CMOs, CNOs, and COOs to get the right employees at the bedside. Hearing from those employees on how to create more efficiency and make their lives easier will also enable for greater engagement.
It’s incumbent on executives to set the tone for management and hold them accountable as well. That may involve creating more opportunities for training or education of managers, allowing them to be better equipped to allocate resources and put workers in the best position possible.
One of the primary ways organizations can be more cost-effective with staffing is by phasing out expensive contract labor, Marquardt stated. For example, traveling nurses, while instrumental for providers during the pandemic, aren’t delivering the bang for your buck to sustain a workforce. The focus should be on recruitment of new staff and retention of employees already in the building, which have clearer ROI.
By aligning workforce initiatives with strategic goals and optimizing labor expenses, organizations will be able to overcome staffing shortages while maintaining financial health.
See more coverage from the HealthLeaders Workforce Decision Makers Exchange here.
The HealthLeaders Exchange is an executive community for sharing ideas, solutions, and insights. Please join the community at our LinkedIn page.
