🏥 $27 Billion Merger
 Happy Tuesday, Hospitalogy fam! Funny story - about 400 of you were chilling in purgatory over the past couple of weeks due to a small subscribing snafu on our end. Sorry about that! If you missed any of my recent posts, I’ve linked them below:
Today we’re covering Advocate’s $27 billion merger with Atrium, Optum’s strategy with SCA, and Envision Healthcare’s recent woes. Also, I've had the privilege of connecting with several of my readers over the past couple of weeks and have been really enjoying getting to know you guys. Feel free to shoot me a DM on Twitter or reply to this e-mail for a virtual coffee! Let’s get after it! Was this email forwarded to you?  HEALTH SYSTEMS Advocate Aurora merges with Atrium to create $27 billion Health SystemAdvocate Aurora Health is merging with Atrium Health to create a $27 billion health system which will operate under a new name: Advocate Health. The new system's combined revenues puts it on par with that of Ascension & Providence at about $27 BILLION - good enough for the 6th largest health system in the U.S. Revenue numbers as of full-year 2021:  Advocate's new footprint will include:
 Madden’s Musing: Context: The announcement creates one of the largest health system mergers since Providence / St. Joe's & then CommonSpirit 5-6 years ago. It’s also right on the heels of the Intermountain-SCL merger, who consolidated in similar fashion into a $14 billion system across non-overlapping geographies. In late 2020, Atrium Health merged with Wake Forest Baptist Health into an $11.5 billion system. There’s absolutely no way that integration is done yet - right? Here’s an interesting little tidbit - according to the press release, Advocate Health will be structured as a joint operating company (JOC). Instead of just contributing assets in a specific area, though, the two systems appear to be layering the JOC on top of 100% of their combined footprint. Which makes me wonder why they went the JOC route. My guess is that the structure makes it easier to unravel if things go south since existing assets will remain in each of the health systems’ respective states. Since antitrust is top of mind, systems are opting to merge with other systems outside of their primary geographical footprints, while still giving them access to scale in order to deal with the labor and inflationary pressures of today. Be on the lookout for a deep dive coming NEXT week on the health system merger landscape, a macro view of what’s going on for hospitals in the currently challenging operating environment, and more pertinent thoughts on the Advocate-Atrium merger. Resources:
 OPTUM'S TAKEOVER CONTINUES SCA quietly rebrands to SCA HealthWith little fanfare, UnitedHealthcare’s Optum appears to have rebranded Surgical Care Affiliates into SCA Health. Under the new slick angular logo and rebranding that everyone seems to be copying, Optum’s strategy is now pretty clear for SCA - create a physician enablement platform to allow specialists in particular to transition to risk-based arrangements. They’ll achieve this goal by aligning with health systems, local market health plans, and the practices themselves through the new SCA platform - a “physician-led, MSO-model of practice management that restores physician agency by aligning incentives to support growth and transition to value.” Sounds familiar, doesn’t it? It’s a very similar strategy as the care platforms I covered just last week. Except their footprint is already scaled for success:  Madden’s Musing: Keep in mind that Optum purchased SCA back in 2017 for around $2.3 billion, and it looks like SCA is slated to grow like crazy given the platform creation and focus on physician enablement. I mean, who can step up to challenge this? Seriously. Every time I think some org has a leg up on Optum in some aspect...they stay ahead of the game. They’re so far ahead of everyone else, it’s truly unreal. Creating a physician enablement platform focused on specialists and ASC revenue streams creates a ton of value for Optum/UHC. Not to mention that CMMI is trying to find ways to grow specialty providers’ role in value-based care arrangements. ASCs are essentially untapped when it comes to risk-based relationships, and specialists control a large portion of the healthcare dollar. We’ll all be submitting our collective resumes to United any day now.  PHYSICIAN SERVICES What’s up with Envision?After going private in 2018 for $9.9 billion, Envision Healthcare seems to be in dire straits. I mean, let’s just consider some recent history for the physician staffing and ambulatory firm: In late 2020, Congress signed the No Surprises Act into law (which, side note, is currently being challenged and will probably need to be modified). I’m speculating here, but this bill likely had an outsized effect on Envision’s pricing strategy. Under the NSA, any surprise bill under dispute went into arbitration.
In April, Standard & Poor’s downgraded Envision’s debt, saying that they expected Envision’s cash and liquidity position to “meaningfully deteriorate” over the next 12 months and that Envision’s liquidity was “less than adequate.” Envision also told its lenders in April that it was delaying its financial disclosures, likely due to payor and accrual issues. Remind anyone of Adeptus?? One month later in May, Envision got in a spat with its lender after Envision moved most of its more profitable AmSurg division AWAY from its current lender in order to borrow more $$$ to repurchase its debt and lower its overall indebtedness. Bottom line - Envision’s existing lenders kinda got screwed, and they’re not happy about it, even considering litigation. Finally, this week, Envision decided to sue UnitedHealth in Florida, calling it an ‘evil empire’ in the lawsuit’s language and accusing the payor of underpaying its contracted reimbursement rates.
Madden’s Musing: All of this to say that it looks like Envisions physician staffing division is hanging on by a thread and the writing on the wall - at least right now - is signaling bad things for the huge physician group.  MARKET MOVERS  Big Winners: The Pennant Group (+37%), Nutex Health (+26%), One Medical (+19%) Big Losers: GoodRx (-24%), Pear Therapeutics (-13%), Warby Parker (-19%) Nonprofit Financials: Of the NFP health systems that have released Q1 financial disclosures on EMMA, none reported a net profit. Only CommonSpirit and Intermountain eked out positive EBITDA margins for the quarter. The poor financial performance is due primarily to two factors, which I've touched on before:
 Oscar Health announced this week that the insur-tech is pulling out of two markets (Arkansas and Colorado) in 2023. Humana and Welsh Carson-backed CenterWell health announced an expansion of their senior primary care joint venture. Under the arrangement, they’ll plan to develop 100 more clinics between 2023 and 2025 and invest $1.2 billion in the de-novo’s.
Amazon-backed tech-enabled care platform Crossover Health announced its intention to expand into Seattle and Austin this week. Piedmont Health tacked on 10 more urgent cares through its acquisition of SmartCare in the greater Atlanta area. ScionHealth acquired Cornerstone, a specialty hospital operator based in Dallas, Texas (shout-out DFW). Don't forget - Scion was spun off in late 2021 as a foster child of some of LifePoint's hospitals combined with Kindred's LTACHs. Interesting to see them making moves here! Encompass is building a 60-bed IRF in Houston. Earnings Drops: HOSPITALOGY HITS
 MISCELLANEOUS MADDENING'S
 JOBS Here are some jobs that I’m curating for the healthcare industry. Use this link to submit your role to be featured if you’re looking to hire. Senior Growth Manager of Health Services, Hinge Health Hinge is looking for someone who has Health Plan relationship management experience as a management consultant, vendor or other partner to lead their growth efforts. If you’re interested in health care and making a difference in people’s lives, and passionate about the intersection of technology and healthcare, then this is for you. Regional Medical Director, Teladoc: Teladoc is looking for someone who will support the Senior Medical Director with implementing and directing policies and procedures, ensuring exceptional medical quality and service is delivered to patients. Represents focused leadership in the creation of an employed model supporting provider needs, process innovation and provider mentoring. Senior Manager, Compensation and Analytics, Virta Health: This role is an opportunity to lead the design and refinement of foundational compensation and people analytics practices, policies and processes in partnership with Virta’s leadership for an organization that is focused on impactful work such as variable compensation standardization. Thanks for the read! Let me know what you thought by replying back to this email. See you Thursday! — Blake   Loving this newsletter? Get in front of 3,250 executives and healthcare decision-makers by clicking below: |
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