Switching from non-profit to for-profit may affect how clinical laboratories operate in the new healthcare system
Shifting away from fee-for-service payment models and towards value-based healthcare is the goal of many non-profit hospital systems. One such transformation is underway at Summa Health, one of the largest integrated delivery networks (IDNs) in Ohio. On January 17, venture capital firm General Catalyst announced that its subsidiary—Health Assurance Transformation Corporation (HATCo)—had entered into an agreement to purchase Summa Health.
“HATCo’s investment into Summa Health will drive not only near-term benefit to the organization and the patients it serves but also sustainable, long-term transformation through a true shift to value-based care and access to new revenue streams, resources, innovations, and technologies,” states a General Catalyst news release penned by Marc Harrison, MD, CEO of HATCo.
Harrison was formerly President and CEO of Intermountain Healthcare, a 33 hospital not-for-profit IDN in Salt Lake City, Utah. This is a noteworthy fact because Intermountain Health has a national reputation as an innovative multi-hospital health system. Some observers believe that Harrison’s involvement signals that General Catalyst believes it has a care model that can deliver better patient care in a profitable manner.
“Under its new structure, Summa will become a for-profit organization, and General Catalyst says it will introduce new tech-enabled solutions that aim to make care more accessible and affordable,” CNBCreported.
“This is the first time that anybody has done anything quite like this,” Harrison told CNBC. “There are many digital health solutions that are out there as point solutions. This is the first holistic transformation of a health system to a thoughtful combination of digital and in-person care.”
“Our intent is to build on and augment the system’s considerable strengths. First and foremost, we share Summa Health’s commitment to serving all members of the community,” wrote HATCo CEO Marc Harrison, MD (above), in a news release. “The Summa Health team also shares our belief that achieving healthcare transformation will require a shift to value-based care … Together, we intend to demonstrate that a model that is better for patients can also be good for business, creating a blueprint for other health systems to effectively serve all people in their communities.” How this shift will affect Summa’s clinical laboratories remains to be seen. (Photo copyright: General Catalyst.)
Betting on Healthcare
In 2023, General Catalyst, an American venture capital firm headquartered in Cambridge, Mass., unveiled its Health Assurance Transformation Corporation (HATCo) and began shopping for a health system to buy.
HATCo has 20 healthcare systems in a network that spans 43 states and four countries, according to Healthcare Dive. The company’s news release states it has been focused on three areas since its start-up:
- Helping its partners on their “transformation journeys.”
- Using technology to build an “interoperability model.”
- Planning to “acquire and operate a health system for the long-term.”
“The goal of the purchase is for the health system to act as a proving ground for General Catalyst to test ways to improve hospital operations and patient care, without risk aversion or cash shortfalls, management said,” Healthcare Dive reported.
Thus, the firm’s announcement to purchase a health system last October “sent shockwaves through the healthcare industry” according to Healthcare Dive.
“At its core, General Catalyst’s long-term Health Assurance thesis is that value-based care not only is good for patients, but also can be a successful business model if deployed with innovative technology at meaningful scale. Its rationale for buying a health system is a belief that it can improve on the traditional model of not-for-profit health system governance and management by embedding new incentives,” wrote Christopher Kerns, CEO and co-founder of Washington, D.C-based research firm Union Healthcare Insight, in a blog post analysis.
General Catalyst’s HATCo may offer up “a profit motive, a longer time horizon, and a channel for dozens of innovative companies to demonstrate value,” he noted.
“The single biggest barrier to promising young healthcare companies is an inability to scale. Many of their innovations—in digital health, patient engagement, revenue cycle workflow, etc.—require willing health system partners who are famously conservative in their investments and service providers, and rarely take risks on newbies. The addition of Summa provides an open laboratory for those innovations,” Kerns added.
Is the Summa Health Deal Good for Healthcare?
Some in the industry were taken aback by General Catalyst’s announcement.
“A lot of people feel like a PE (private equity) or venture capital company owning a hospital is kind of like asking Freddy Krueger to come babysit your kids. It just makes people a little nervous, and it doesn’t feel quite aligned with this concept of healthcare being a human right,” John Bass, CEO of Hashed Health, a Nashville, Tenn.-based healthcare venture studio, told CNBC.
Nevertheless, it’s a moot point. HATCo is moving forward with its purchase of Summa Health.
“For this bet to work, Summa will have to be a solid proving ground for [General Catalyst’s] portfolio companies. And that means either Summa itself will have to grow, or it will have to act as a force multiplier for its other value-based portfolio companies to justify the considerable capital expended. I have to say, that’s a tall order, but not an insane one,” said Kerns in the Union Healthcare Insight blog post.
Healthcare managers may find it interesting to follow HATCo and Summa Health on their planned journey. The results may speak for themselves. Either way, clinical laboratories and anatomic pathology group practices in HATCo’s health system may be in for some interesting changes.
—Donna Marie Pocius
Related Information:
Our Acquisition of Summa Health
General Catalyst to Acquire Ohio Nonprofit Summa Health
The Big Bet of General Catalyst and Summa Health
4 Takeaways on General Catalyst’s Plan to Acquire Summa Health
General Catalyst’s New Health System Company to Acquire Summa Health
Venture Capital’s Firm’s Plan to Buy Nonprofit Hospital System Has Ohio Community on Edge
Intermountain Posts $135M Operating Income
General Catalyst’s HATCo Plans to Purchase Ohio Healthcare System Summa Health
Summa Health Fields Concerns Over General Catalyst Acquisition
