Two economic and healthcare industry experts — J.B. Silvers, a professor at Case Western Reserve University, and Paul Lee, a senior partner and founder of Strategic Healthcare — gently sparred Monday afternoon about the proposed sale of Summa Health and its impact on the city of Akron and patients the hospital serves.
Silvers, whose research has focused on the economic management of healthcare companies, was largely in favor of the acquisition. Lee, the former vice president of the Ohio Hospital Association, offered caution, sharing pitfalls other hospitals have experienced after similar purchases.
“Is it a crapshoot?” Lee asked during the discussion. “God, I hope not.”
The Akron Press Club hosted the panel discussion ahead of the proposed sale of Akron’s largest employer, Summa Health, to a private equity firm.
Summa Health is in talks to be purchased by Health Assurance Transformation Corporation (HATco), a venture capital subsidiary of General Catalyst. Summa’s president and CEO, Dr. Cliff Deveny, said the sale could be complete by the end of the year. The Akron Beacon Journal previously reported that the final contract is being worked on.
The deal will be subject to state approval, but the larger issue is whether the acquisition will benefit the hospital’s patients and the community at large. Silvers said it will, especially given the technologies and efficiencies that HATco will bring in, along with the clearing of the roughly $800 million in debt Summa Health currently carries.
Banking on new tech and stable leadership
Silvers added that the acquisition has a “trifecta” of dynamics that make it uniquely set up for success: the leadership of the companies and their vision for what occurs after the sale, the technologies HATco could bring to the hospital system and the simultaneous clearing of Summa’s debt and formation of a large community foundation with the proceeds of the sale.
“To have that community capital making investments in health care, with that amount of flexibility, and a system that’s continuing to provide health care and one that’s innovating, that’s sort of the trifecta,” Silvers said.
Lee was more measured in his optimism, citing the involvement of a private equity firm and their mandate for large shareholder profits as a potential long-term hurdle for high-quality health care.
“Show me a private equity company that doesn’t need to make a lot of money,” Lee said. “That is the difference, I think. That’s a fundamental difference.
“I love what they’re saying,” he continued. “… This is not new. There have been many, many efforts over the past 10 years in particular of trying to come up with new technology and new ways to deliver care that are less expensive. There’s been some success in that, but will it be at the margin needed for the private equity group?”
Silvers retorted that the profit won’t necessarily derive from the work at Summa Health, but from the successful application of new technology and the sale of that technology to other systems.
“If you get it to work really well at Summa, that is a model that will let you sell it to everybody else in the world,” Silvers said. “That company is where you start making your money and the stockholders and investors start doing well with that.”
Health care in Akron: A worthy gamble?
Lee said it’s a roll of the dice, especially given the high levels of competition in the tech sector. If it doesn’t work out, he said there are examples across the nation of for-profit hospitals eschewing services that are valuable to the community but don’t bring in enough cash.
“The promise of technology and outside money coming in, it’s pretty alluring,” Lee said. “… But what’s really happening? Why would a private equity organization continue to operate a series of service lines in a community that are absolute money losers?”
Silvers’ optimism comes back to Summa’s management and the clearing of their debt during the deal.
“If you have good management and are not loaded up with debt, you have a lot better chance to make this work,” he said.
If sold, what happens to Summa’s employees?
HATco has pledged to hire all of Summa’s nearly 9,000 employees as a part of the deal, a promise that mitigates some concerns for the panelists about a dropoff in the quality of care and services provided, at least in the years immediately following the sale.
“If I were a Summa person, I would say to my management, I’m for this deal, whatever it is, if you give me a two-year guarantee,” Lee said.
The potential sale will certainly change the landscape for Akron’s largest hospital. But the change, alongside the influx of cash and new technologies, according to Silvers, brings opportunities.
“Is this going to open up possibilities to do things that you know you’d like to do but you don’t know how to do it right now?” Silvers asked. “Is it going to open up new ways to take care of patients and make the population healthier than they would be otherwise?”
