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Becker’s Healthcare Podcast
Prime Healthcare Foundation Expansion and Health System Financial Turnarounds with Alan Condon
00:10:20
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- [00:02]
A
Every year, Becker's annual meeting brings healthcare leaders together to unpack the most pressing issues facing the industry. And every year, those conversations shift in profound and unexpected ways. This April, more than 3,500 healthcare executives will return to Chicago for Becker's 16th annual meeting. 795 elite speakers will offer new lessons, new case studies and predictions about what comes next. Join us April 13th through the 16th. For the agenda and event details, visit BeckersHospReview.com and click on the Events tab in the upper right.
- [00:38]
B
This is Scott Becker from the Becker's Healthcare Podcast. We're thrilled today to be joined by Editor in Chief Alan Condon. Alan's a brilliant journalist and a great leader. Alan joins us regularly to talk about what are a couple of the stories that he's watching in healthcare. Alan, let me tee it up and ask you to take it away. What are a couple of the stories you're watching currently in healthcare?
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C
Yeah, absolutely. Great to be back with you, Scott, today after the long weekend with President's Day. So catching up on a lot of news this week. And I think first and foremost, just to kind of kick things off with a really big transaction we've been following for a number of months, just got over the line and that is Prime Healthcare with another acquisition sealed in the books. That's Prime Healthcare's nonprofit Army. Prime Healthcare foundation just completed its acquisition of Central Maine Healthcare. So that's a three hospital system in Maine, includes a cancer center, a heart institute, more than 40 different physician practices. It's an interesting deal given the prime headquartered in California. This deal is the complete opposite side of the state. It's a market where it's just entered now. So we look at what happened last year with prime entering Illinois for the first time with a nine hospital acquisition from Ascension. Now it's entered its 15 states with the acquisition of this Tree Hospital health system in Maine, investing about 150 million into the system over the next few years to improve facilities, services, infrastructure. So I think with that acquisition, prime is now a 54 hospital health system now operating in 15 different states across the country and certainly no signs of slowing down either. There are a couple of acquisitions that it's also looking at this year as well. So one, one big acquisition just got over the line to kick off middle of February as we get back here.
- [02:34]
B
I mean, that's literally remarkable what Prime Health care has done. And it seems like Maine must not be an easy state to do health care in. What does that look like? And why did they sell to prime what's any information there?
- [02:51]
C
Yeah, absolutely. I think it's certainly an interesting deal. I think HCA Healthcare has got a bit of a market presence in Maine, quite a rural state as well. I know that the system had its own financial issues, so we're certainly looking for a large financial partner, a large health system partner. Brian with a bit of a track record in turning around some of these maybe financially challenged hospitals. Health systems saw this as a big opportunity for it to really hop into Maine with an immediate presence. Like I said, those three hospitals, significant physician practices, cancer institute, heart institute. It's kind of interesting, I think we're seeing for arguably the first time ever, a lot more of these systems considering what you might call non contiguous transactions. So I. E. Health systems entering a state that's not a neighboring state, not an adjacent state. Like I said, prime certainly operates in many different states. A headquartered in California, but jumping all the way over to the east coast from this transaction, jumped into the Midwest with the Illinois Ascension Hospitals last year and it kind of aligns with. I spoke recently with Prime Healthcare CFO Steve Aleman, fantastic leader who kind of gave me a little bit of insight into Prime's M and A approach, their roadmap, their playbook here. It's essentially looking for not one two hospital acquisitions, but really looking for this quote unquote market cluster approach. So can we jump into Illinois with a cluster of hospitals that are immediately gain a foothold, a footprint in this new market? Same opportunity here at Maine. It's not one or two isolated hospitals, it's three hospital system, number of physician practices, some great cancer institute, heart institute, like I mentioned. So a lot of opportunity to grow after this market cluster approach. So no doubt some big challenges in operating in so many different and unique markets across the state, but it's certainly an interesting deal and be looking to keep our eyes peeled for any other health systems who are looking at potentially taking a leaf out of Prime's playbook here in terms of these non contiguous healthcare M and as.
- [05:01]
B
Thank you very, very much. I think your point on buying clusters of hospitals versus a one off is so right on. Nobody wants to own on one off independent hospital someplace. That's just a prescription for trouble and not economies of scale. And a lot more. I think your point is so right on. And what are the stories you're watching currently?
- [05:19]
C
Yeah, I think a number of big financial reports that we just covered last week at the tail end of last week as well. So just a quick kind of update on some of those. I think Ascension, one of the latest big, big nonprofits, report their financial reports. So for the fiscal second quarter, that is the three months ending December 31, Ascension continuing to trim down its operating loss is kind of a negative 0.9% operating margin for that fiscal second quarter. But that is a big improvement on the negative 2.2% margin it reported in the same quarter last year. So continuing to really trim down its operating losses, move its operating margins back up to that break even point, continue to move in the right direction there. And I think the results from Ascension really show financial stabilization. Certainly it spent the last couple of years, as we know, Scott, reshaping its portfolio, its operating model through a number of strategic divestitures, some market exits, hasn't acquired a hospital or anything in quite some time. But we do know this quarter, or indeed the start of next, it is expected to acquire Amsurg, which we've talked about on the podcast before. Huge, huge ASC chain operator. So certainly getting its finances back on track in a way to really take on this big $3.9 billion acquisition, give it an immediate, significant, massive foothold in the ambulatory surgery center space as well. So I think just looking at Ascension's portfolio, if we take a trip back three, four years ago, Ascension operated about 140 acute care hospitals across multiple states. Now, as you look at February 2025, it owns 90 wholly owned or consolidated hospitals. So, you know, trimmed its hospital portfolio by about 40, 50 hospitals over the last few years, certainly taking a big, big jump into the ambulatory surgery center space and certainly getting its finances back on track after a period of financial instability and some challenges there. No.
- [07:26]
B
Fantastic. And I also saw that you referenced today Common Spirit Health having a solid quarter to another one of the large, large health systems.
- [07:36]
C
Yes, yes, absolutely. So I think Common Spirit reported just after Ascension as well. So I think interesting to look at those two systems together, Ascension and Common Spirit. Common Spirit recorded a, I believe a break even 0% margin for the same quarter. That's the three months ended December 31st. But I think that's down. That's dropped down from a 1.3% margin the same period last year. So a little bit of a fall in terms of its margin there. I think labor costs have been increasing for Common Spirit supplies, whatnot. Yes, no doubt revenue is on the rise, but I think hasn't been offset by some of the challenges it's seeing on the payer side of things. Also in terms of the labor cost standpoint as well, Common Spirit under the new leadership of CFO Michael Browning, who recently joined from Ohio Health. Really kind of taking a hard look at some of the overall operating models. Where does Common Spirit want to operate? Does it want to exit certain markets? Not too dissimilarly in the way Ascension has done over the last couple of years. Common Spirit is now looking at selling seven hospitals in a couple different states. Ohio, North Dakota looks like taking a similar page out of the Ascension playbook as it looks to exit some particular markets to the right buyers. Of course, in addition to that, Common Spirit is also exiting its joint venture with Tennis. That's the Conifer Health Solutions joint venture. Common Spirit is around about a 20% minority stake interest in the Conifer Health revenue cycle management firm Tenet with this deal about a $1.9 billion deal to acquire 100% of the revenue cycle company back under its management. So a lot of a lot of interesting deals going on at Common Spirit as well over the next few months. Working a lot on AI being more efficient in certain areas. Revenue cycle is a key area that we've noted from recent investor calls. So certainly a lot of work to do according to CEO and CFO there. But be certainly paying close attention to Common Spirit over next coming quarters as they look to turn that quarter and potentially exit some key markets as well.
- [09:53]
B
No fantastic. And I did see that for the quarter Commons Fair had $10.5 billion in revenues. Puts them on pace to be about a 40 billion a year system which is just humongous for the not for profit healthcare sector. So fascinating. Alan, as always fantastic to visit with you on the Beckers Healthcare Podcast. You do just a tremendous job. Thank you for joining us today on the Beckers Healthcare Podcast.
- [10:17]
C
Always a pleasure. Thanks so much Scott.