Duke Health has signed on to buy Lake Norman Regional Medical Center to grow its reach in North Carolina.
Community Health Systems has struck another deal for a hospital it has been trying to unload as it continues to aggressively divest.
The health system reached agreement with Duke Health to sell Lake Norman Regional Medical Center for $280 million, six months after a previous deal to move the hospital was abandoned due to regulatory pressure.
Mooresville, North Carolina-based Lake Norman Regional would add a 123-bed facility to Duke Health’s services in the Tar Heel State, representing a “significant expansion,” the academic health system said in a news release.
“We recognize the health care landscape is changing,” Craig Albanese, CEO of Duke University Health System, said in a statement. “While we continue to expand access to care within the communities we serve, it’s also time to do more and deliver care to more people – in more communities.”
Duke Health currently operates three hospitals that make up the Duke University Health System: Duke University Hospital, Duke Regional Hospital, and Duke Raleigh Hospital, a campus of Duke University Hospital.
For Franklin, Tennessee-based CHS, the deal marks a second opportunity to divest Lake Norman Regional, which was one of two hospitals on its way to Novant Health before regulators stepped in.
The Federal Trade Commission sued to block the transaction in January, arguing that the acquisition would allow Novant to control over 65% of the market in the region, resulting in less competition and negative consequences for patients. The agency later requested a preliminary injunction on the sale.
In June, Novant and CHS called off the deal, forcing CHS to seek out another buyer while it pursued a divestment plan to yield more than $1 billion in sales.
The new sale of Lake Norman Regional is expected to face less regulatory scrutiny because of Duke Health’s market presence and the fact that the hospital is being acquired as part of a standalone transaction.
If the deal passes regulatory review, it is expected to close in the first quarter of 2025, according to the news release.
Aside from Lake Norman Regional, CHS has also had difficulty completing other sales this year.
In November, the health system and WoodBridge Healthcare mutually agreed to terminate their agreement for three Pennsylvania hospitals for $120 million due to the buyer failing to secure funding.
The pharmacy chain operator is reportedly mulling selling itself to an unexpected buyer in the hopes of stabilizing.
The retail pharmacy landscape could be in for a shake-up with one of its giants potentially ceding control to private equity.
As it struggles to turn around its financial troubles, Walgreens is weighing a sale to Sycamore Partners that could close in early 2025, according to a report from the Wall Street Journal, which cited people familiar with the discussions.
The move would likely drastically alter Walgreens' portfolio, with the private equity firm expected to sell off parts of the business or work with partners if a deal is completed, the report stated.
New York-based Sycamore focuses on consumer and retail investments. Aside from its purchase of office supplier Staples for almost $7 billion in 2017, the firm has also invested in retail brands like Hot Topic, Aeropostale, and Ann Taylor.
Although Walgreens would be a big bet and foray into healthcare for Sycamore, the acquisition may prove to be a worthwhile buy-low with the pharmacy chain's market value sitting under $8 billion after exceeding $100 billion in 2015.
Retail healthcare, however, has been become an unforgiving space as major players like Walgreens and CVS Health deal with diminishing reimbursement on the pharmacy side and consumer demand constricted by e-commerce.
Still, Walgreens is committing to its core retail pharmacy business and veering away from its primary and speciality care offerings, including VillageMD, which have failed to generate profit.
The company announced earlier this year that it would close 160 VillageMD clinics and reported nearly $6 billion in net loss from the investment for the second quarter.
By divesting VillageMD following a sale, Sycamore may recoup some value due to the primary care provider potentially functioning better as a standalone business.
The firm could also be pursuing the acquisition with the sense that there will be more regulation around pharmacy benefit managers, creating better margins for pharmacies like Walgreens. A bipartisan group of legislators have introduced the PBM Act in the Senate, seeking to require PBMs to sell any pharmacies they own.
If Sycamore isn't interested in turning around Walgreens' pharmacy business, it could opt to focus its efforts on leveraging the company's retail footprint. While Walgreens said it would close 1,200 stores in the next three years, Sycamore's investing experience and knowledge in retail may allow it to squeeze out more profit.
For fiscal year 2024, Walgreens suffered $8.6 million in net losses, compared to a $3.1 million loss in 2023.
With no clear path to improved financial viability at the moment, incurring significant changes as privately-owned company could be the push that Walgreens needs.
Kaufman Hall's latest look at hospital finances shows that the average operating margin ticked up in October.
Shifting care to outpatient settings is helping hospitals find stable financial footing.
The average monthly operating margin for hospitals jumped 6.2% in October, pushing the year-to-date margin to 4.4%, as outpatient revenue remained on the rise, according to Kaufman Hall's National Hospital Flash Report.
Outpatient revenue per calendar day increased 7% month over month and 13% over the same period in 2023, outpacing inpatient revenue's bump of 1% and 6%, respectively.
Average length of stay also trended positively, declining 3% from September and by 4% compared to October 2023.
Meanwhile, adjusted discharges per calendar day climbed 5% from the previous month and 7% year over year, contributing to a decrease in overall expenses on a volume adjusted basis, the report stated.
Still, hospitals are dealing with ballooning supply and drug costs that are putting pressure on the bottom line.
For October, supply expense per calendar day increased by 8% versus September and by 13% versus October 2023, whereas drugs expense per calendar day shot up 7% and 15%, respectively.
Though labor expenses have been a challenge for providers since the pandemic, hospitals are getting better at balancing those costs, evidenced by a modest 1% rise in labor expense per calendar day in October.
"Hospitals continue to experience overall financial and operational stability," Erik Swanson, Kaufman Hall senior vice president and data analytics group leader, said in a statement. "However, supplies and drug expenses continue to put pressure on hospitals, and cost containment should be a priority. Continued growth in outpatient revenue and reductions in the average length of stay indicate that patient care is shifting to more ambulatory and outpatient care sites."
The National Hospital Flash Reports uses data from more than 1,300 hospitals on a recurring monthly basis from Syntellis Performance Solutions, now part of Strata.
The leader of the much-maligned payer addressed employees following the fatal shooting of Brian Thompson.
In defending his company against the online backlash in the wake of Brian Thompson's murder, UnitedHealth Group CEO Andrew Witty has triggered another surge of scrutiny.
Two days after the UnitedHealthcare CEO was gunned down, Witty spoke to employees in a video message, which has since leaked, pushing back against the "vitriolic media and commentary" aimed at the health insurer and its slain executive for denial practices.
Luigi Mangione was arrested and charged with murder in New York in connection to the shooting and killing of Thompson in Manhattan, where UnitedHealthcare was holding its annual investor conference.
Shell casings found at the scene of the shooting had the words "deny," "defend," and "depose" written on them, according to reports, in reference to a phrase used by insurance industry critics to describe how insurers delay payments, deny claims, and then defend their decisions.
In his company address, Witty told employees that UnitedHealth Group's function of denying claims is vital to the larger healthcare system.
"Our role is a critical role, and we make sure that care is safe, appropriate, and it's delivered when people need it," he said. "We guard against the pressures that exist for unsafe care or for unnecessary care to be delivered in a way which makes the whole system too complex and ultimately unsustainable."
A recent report by the U.S. Senate Permanent Subcommittee on Investigations released in October highlighted UnitedHealthcare's use of AI to deny claims and found that the insurer's prior authorization denial rate for post-acute care jumped from 10.9% in 2020 to 22.7% in 2022. Thompson was named CEO in April 2021.
"The mission of this company is truly to make sure that we help the system improve by helping the experience for individuals get better and better," Witty said. "There was nobody who did more to try and advance that mission than Brian Thompson. There are very few people in the history of the U.S. healthcare industry who had a bigger positive effect on American healthcare than Brian."
The video of Witty has fanned the flames in online communities, where people have taken issue with the CEO's comments while continuing to criticize UnitedHealthcare and insurers in general, as well as the healthcare system overall.
"I encourage you to tune out that critical noise that we're hearing right now," Witty said. "It does not reflect reality. It is simply a sign of an era in which we live. What we must do is focus on what we know to be true and what we know to be true is that the health system needs a company like UnitedHealth Group and it needs people like Brian within it."
The nonprofit health system bounced back in a major way from the previous quarter to start the fiscal year on a positive note.
After seeing its finances plummet due to a significant cyberattack suffered in May, Ascension has started to turn around its bottom line.
The hospital operator kicked off fiscal year 2025 with a $197 million loss from recurring operations, marking a $1.2 billion improvement from the last quarter as recovery from the cyberattack continued and patient volume steadily grew.
Ascension's first 10 months of fiscal year 2024 showed promise, but the ransomware attack wreaked havoc on the final quarter, resulting in a $1.4 billion recurring operating loss in Q4.
One of the most notable effects of the attack was on same facility patient volume, which dropped between 8% to 12% on average year over year in May and June.
In Q1 FY2025, same facility volumes returned to within 1.5% of the volumes from the previous year, while same facility net patient service revenue increased 2.4% alongside same facility operating expenses jumping 2.6%.
The St. Louis-based system "continues to expand capacity and backfill certain volumes that have shifted to the outpatient setting as well as improve access, including any areas impacted by the cybersecurity attack," Ascension stated in its release.
"This quarter's financial results mark a pivotal step forward, illustrating the effectiveness of our focused economic improvement strategies," Saurabh Tripathi, Ascension executive vice president and CFO, said in a statement. "An uplift in recurring operating performance reflects our commitment to disciplined financial management, carefully balanced between growth and efficiency. Despite ongoing challenges, including the continuing recovery from May's cybersecurity attack, we are solidifying our operational foundation to support stability and future investments."
Ascension's net income for Q1 was $387 million, compared to a net loss of $597.6 million over the same period last year.
In addition to several divestitures the system has recently made, Ascension also entered a joint venture with Henry Ford Health System. The partnership, which launched on October 1, allows Ascension to extend its footprint in Michigan.
Leaders have been forced to make cybersecurity a priority after several attacks plagued healthcare this year.
Shoring up cybersecurity became a necessity for healthcare organizations this year as several attacks highlighted vulnerabilities.
While other pain points such as the workforce continue to keep CEOs up at night, cybersecurity has come to the fore and forced leaders to rethink the number of resources they're putting into keeping their and their patients' data safe.
Here are four cybersecurity trends HealthLeaders highlighted this year that grabbed the attention of CEOs.
Change Healthcare attack fuels 'year of chaos'
The tone of the year was set in many ways by the Change Healthcare cyberattack that occurred in February.
It was called "the most significant cyberattack on the U.S. healthcare system in American history" and had far-reaching consequences. A survey of nearly 1,000 hospitals by the AHA at the time found that 94% of hospitals reported financial impact, with more than half reporting "significant or serious" impact.
“Cybersecurity issues are just added icing on the cake,” said Aspirus Health CEO Matt Heywood, who coined 2024 as "the year of chaos."
After Change Healthcare, more chaos ensued as other major organizations were hit by cyberattacks in the following months, including Kaiser Permanente and Ascension.
If CEOs weren't taking cybersecurity seriously enough before, 2024 was a harsh reminder of why they should ensure that their systems are protected.
Lack of response plans
In the wake of suffering a cyberattack, it's vital that organizations have a response plan in place to mitigate the damaging effects.
However, only 63% of companies have such a plan, according to a survey by Software Advice, which fielded answers from 296 respondents with IT management, data security, data management, security training or audit responsibilities at healthcare organizations.
While preventative measures are needed, a response plan "that includes defined roles and responsibilities, communication protocols, and a prioritization list" can reduce downtime and further loss of data in the aftermath, the report stated.
Investment ramping up
The good news is that many organizations have recently recognized the importance of increasing their cybersecurity investments.
A survey of 150 providers and payers by Bain & Company and KLAS revealed that 75% of respondents reported upping their IT investments over the past year, with an emphasis on addressing cybersecurity.
In response to the Change Healthcare attack, 56% of payers and 38% of providers increased cybersecurity software spending, with only 11% of providers and 8% of payers choosing not to act.
More than a third of providers (38%) chose investment in IT infrastructure and services, including cybersecurity, as a top three priority most often.
Those figures could potentially rise in 2025 as more cyberattacks continue to heighten CEO awareness.
Longer recovery times
Not only are ransomware attacks in healthcare increasing, but their recovery times are also getting longer.
This year, ransomware attacks in healthcare reached a four-year high since 2021, with 67% of organizations saying they were impacted, according to a survey by Sophos. In 2021, the security solutions firm found that 34% of companies were affected.
Meanwhile, fully recovering in a week or less was only possible for 22% of organizations this year, compared to 47% in 2023 and 54% in 2022. More than a month to recover was necessary for 37% of respondents, a jump from 28% in 2023.
Due to longer recovery times, companies are losing more money from cyberattacks. Organizations reported a mean cost of $2.57 million to recover from a ransomware incident, more than doubling the cost of $1.27 million from 2021.
“It's incumbent on all CEOs in healthcare and other industries to be vigilant on this front, to make sure that there are tons of people in place managing that vigilance on a day-to-day basis, and that function is appropriately resourced,” Cedars-Sinai CEO Peter Slavin said. “All organizations just need to do their best to try to prevent such a catastrophe from happening.”
A new report reveals the benefits of integrating with larger health systems for struggling rural facilities.
One tried-and-tested approach to keeping rural hospitals open and preserving access to care in those communities is integration with health systems.
While it may not be right choice for all rural hospitals, facilities that are vulnerable can greatly improve their financial viability and sustainability by affiliating with, merging with, or being acquired by a larger hospital operator, according to a new report.
The analysis, which was conducted by consulting firm Dobson DaVanzo & Associates and commissioned by the Coalition to Strengthen America's Healthcare, examined research on the economic state of rural hospitals, Medicare cost reports, AHA Annual Survey data, and interviews with stakeholders.
Many rural hospitals have succumbed to financial pressures, the report found, with 110 closures occurring between 2011 and 2021. More than half (55%) of those closures were of standalone hospitals.
Meanwhile, 45% of the hospitals that were at high risk before a merger, acquisition, or affiliation with a larger system between the same period experienced financial improvement after integrating. The average total margins of rural hospitals post-merger jumped from 1.8% to 2.2%, and for facilities post-affiliation that figure climbed from 1.5% to 2.3%.
One in three hospitals that were at high risk of closure were no longer high-risk after merger or being acquired, whereas two in three hospitals that were at high risk of closure were no longer high-risk following affiliation, the report stated.
Aside from the financial benefits, integration can also serve rural hospitals operationally.
"Additionally, rural hospitals that align themselves with a hospital system can benefit from the management processes, organizational structures, telehealth capabilities, and technological innovation available at other system hospitals," the report said.
The importance of M&A for rural hospitals right now can't be overstated, with more closures likely on the way. According to recent analysis by the Center for Healthcare Quality and Payment Reform, more than 700 facilities, or 30% of all rural hospitals in the U.S., are facing closure, including 360 being at immediate risk.
Low reimbursement from payers is the number one factor creating financial turbulence for these hospitals, putting stress on CEOs to find solutions for keeping their doors open.
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.
