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Becker’s Healthcare Podcast
Revenue Cycle Shakeups and the Growing Focus on Rural Hospitals with Alan Condon
00:10:17
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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 Beckershospitalview.com and click on the Events tab in the upper right.
- [00:38]
B
This is Scott Becker with the Becker's Healthcare Podcast. I'm thrilled today to be joined by Alan Condon, editor in chief of Becker's Healthcare. He does an incredible job of following what is going on with systems in the country, with what's going on with finances in the country, and a lot more. Alan, I'm going to tee it up for you. Give us a couple quick stories of what you're watching on the finance side and in healthcare today.
- [01:03]
C
Yeah, absolutely. So Scott, I think a couple of stories that I wanted to focus on today focus kind of heavily on the revenue cycle space, just kind of picking up on a few really big deals that we've seen recently and what's coming down the pipeline. So I think first and foremost to kick things off here with big, big, big deal just announced, reported yesterday at Becker's Hospital Review in our CFO newsletter, also in our revenue cycle newsletter. And that's Tenet Healthcare Big for profit, essentially regaining full control of its revenue cycle management subsidiary. That's Conifer Health Solutions as Carbon Spirit, huge, huge nonprofit system as we know, exits that joint venture completely. So big, big deal. We've seen a lot of move in the Common Spirit restructuring, focusing on its core assets, offloading a couple hospitals and key assets. And this is essentially a next step in what we're seeing coming down the pipeline common sphere from a strategy standpoint. So Common Spirit is going to pay just short of $1.9 billion to tenant over the next three years, while Conifer will pay about $540 million to Common Spirit, essentially acquiring its 24% minority stake in the company. So Conifer will continue to provide revenue cycle services to Common Spirit throughout the end of 2026, but then once January 1st of next year comes into play, that partnership will be dissolved. So Tenet as we know been offloading hospitals for quite some time. Again, this will really take 100% equity control of its kind of for health Solutions subsidiary, essentially giving a greater flexibility to support the long term growth of Conifer Health really looking to bolster it by expanding investments in AI in automation, really bolstering, strengthening its global operating capabilities. So I think Tenet is quite interesting and I believe last year, the year before it sold about 40 in hospitals for substantial, substantial returns. What's interesting about some of those, those hospital sales on tenants side is that it has structured some of those deals in a way that Conifer becomes the provider or continues to be the provider of revenue cycle management services to the hospitals that it sells. So Orlando Health acquired a bunch of tenants hospitals last year. Conifer turns out to be the exclusive provider revenue cycle management services for those hospitals, so on, so forth. One big deal, not over yet, but I think just announced, just reported recently we're going to tune into Tenet's fourth quarter earnings call I believe next week, which no doubt that'll be a huge sticking point, a huge talking point to kind of pull out a little, a few more details on that deal. But big, big deal in the revenue cycle management space that I wanted to call out there. Scott.
- [04:02]
B
No, that's fascinating. And what drives some of that, what drives this, this, this going on? Talk a bit about that because I do think it's fascinating and thank a little bit about what drives this, this Conifer Common Spirit tenant thing. It seems like partially they probably did a deal originally. Common Spirit gets part of it. Common Spirit promises to do the Reverend cycle with them. Common Spirit is no longer to do the reverence cycle with them. So now Common Spirit ends up selling back their shares in Conifer. Is there any more detail? I mean that's how a lot of these deals tend to work. I don't have details on that deal specifically, but is there any information out there on how this deal, why this is going on?
- [04:39]
C
Yeah, I mean absolutely. I think a bit more detail will be coming out, no doubt in the comments period. Earnings call, the investor call coming up and the tennis investor call coming up. I think this deal was going back as early as 202012 before the common Spirit big merger was in place. A 10 year contract just got over the line. So I think again Common Spirit with that minority stake around about 24% in the overall company. But I think from a strategic standpoint, really, really smart move on Tenet's well, huge, huge investment in the outpatient space, offloading a lot of inpatient hospitals and really focusing on outpatient growth. ASCs no doubt. Econifer is a huge, huge subsidiary that is looking to grow as well as revenue cycle becomes more prominent as AI becomes more deeply integrated, deeply embedded across revenue cycle. So no doubt some really interesting things to come there. And we'll be tuning in the upcoming earnings call to put out some more details for our audience as well. But I think it ties nicely into the next story that I wanted to touch on, Scott, as well as you're kind of staying on the revenue cycle trend here. Community Hospital Corporation this is the hospital company headquartered in Texas. They just today have announced that they're launching their own revenue cycle management company specifically targeted at helping rural and community hospitals. Companies called Options or cm. Again offering the full spectrum of technology and services across the entire revenue cycle to rural providers. Community providers. Hospitals can choose to opt in for support for specific functions or they can go full outsource, outsource the entire revenue cycle to this company. I think this is quite an interesting development, but seems to be a bit of an emerging trend as there is such a big gap in the market here for revenue cycle management companies to help rural hospitals and providers. Specifically, going back to the CEO and CFO Roundtable in November here in Chicago, I had the pleasure of sitting down with Chris Harrison, former CFO who's recently been the CEO of Quorum Health. So just for listeners who mightn't be as well acquainted with the system, Quorum Health For Profit System, headquartered in Tennessee that was spun out of Community Health Systems a couple of years before the pandemic. So Chris seemed to see that Quorum Health is launching their own rural hospital MSO focused on revenue cycle management as well. So huge, huge part of Quorum Health's growth strategy launching this rural hospital MSO revenue cycle management company. I think the wider question and the wider backdrop against all this is I think with a big look at what CMS has done with that $50 billion world health transformation Fund that's drawn significant interest from consultants from vendors. So I think we're seeing Tenet's big move taken back. Conifer Community Hospital Corporation launched their own revenue cycle management company, Quorum Health also launching their own revenue cycle management company. Those two companies specifically focused on rural hospitals, community hospitals, rural providers. So really interesting developments there. I know that we see rural hospitals in dire need of some support in this way, shape or form and significant area of growth for some of these companies as well.
- [08:05]
B
It's literally a fascinating discussion because there's two things that overlap there. One, we're seeing a lot of different consulting firms and organizations trying to chase some of this money that's going into rural health care under this new act. So we're seeing a lot of that I can't believe the amount of discussions of people trying to chase those dollars. That's not good or bad, just observation. Second is revenue cycle. In our ins main health care system remains a huge business area as 5 to 10% of all dollars allocated to healthcare somehow or another flow through to revenue cycle providers, revenue cycle operators into revenue cycle. So it remains a huge business in so many different ways. Just absolutely fascinating. Alan, anything else you wanted to comment on there? I find the stuff with the Conifer stuff to be fascinating. Community Health Corp. Launching a revenue cycle business, Quorum Health, which at one point was a subsidiary of Community Health Systems back in the day doing whatever they're doing in rural. Just fascinating to these different activities and different initiatives aimed at where some of the dollars are flowing.
- [09:10]
C
Yeah, I think you hit the nail on the head. Not, not too much to add, but I think just the backdrop of the 50 billion dollar rural health transformation Fund. I think you hit the nail on the head there Scott. Just as the last comment from Chris who I spoke to recently, the CEO of Quorum Health again said that his goal, I guess with this MSO that's revenue cycle management based, targeting raw providers, wants to build something that's by rural providers for rural providers before some of those outside entities with maybe less mission alignment end up dominating that space. So it kind of seems like a bit of a race to kind of get this thing started at the moment with that rural health transformation Fund. A lot of folks chasing the dollars there. Great observation on your part. So certainly interesting to keep an eye on this space over the next couple of quarters.
- [09:54]
B
And certainly a lot of rural CEOs concerned that the money's going to get scattered to so many different places and not really help rural systems in rural health care. There's we've heard a lot of that as well those concerns. So just absolutely fascinating. Ellen, I want to thank you for joining us today on the Becker's Healthcare podcast. Thank you so much Scott.
- [10:12]
C
Always a pleasure. Thank you so much.