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Another Private Equity deal or the start of healthcare transformation?


Today in health it a closer look at the Hatco and Summa. Acquisition. Yeah. Acquisition. Looking forward to it. My name is bill Russell. I'm a former CIO for a 16 hospital system and creator of this week health instead of channels and events dedicated to transform healthcare. One connection at a time. We want to thank our show sponsors who are investing in developing the next generation of health leaders.

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It's it is these story. And it's not a new concept in that private equity. Or venture capital. Thinking we're going to get into healthcare and we're going to change things at that, that in and of itself is not a new storyline. And so you're going to have people who are looking at it going, oh, it's the same old storyline and they're going to be. Not as optimistic as others, and then you're going to have others. Who?

I've saw people like doing high fives and victory laps. Oh, this is so transformational, whatever it hasn't done a thing yet. All right. So let's not do the high fives just yet. It's a but here's what I want to look at today. I want to look at the foundation for this. Is it the right foundation?

Do we have the right momentum? Do we have the right leadership and what will this take in order to be successful? So that's what I'm going to do. I'm just going to go straight to the. General catalyst, a website for the press release because it was a really well-written press release gives you a lot of the foundation for it.

Our acquisition of Summa health coming together to transform healthcare. It's often said that the definition of insanity is to do the same thing and expect different outcomes. By that measure, many of the previous well-intentioned, but ultimately failed efforts to transform our healthcare systems have been insane. We at general catalyst have long advocated for a fundamentally different approach. To yield a fundamentally different and better outcome. One that helps to realize the promise of health assurance care that is more proactive, accessible, and affordable to people everywhere.

Now you're going to hear that. And if you're on the hospital side, you might say, oh, we're after that, we've been after that for years and eons and decades. And we've been more accessible in the previous years because we're providing these tools and those kinds of things. Affordability is hard to argue. It period.

It's just hard to argue. Proactive and care pathways. We're trying to do all those things. So you're going to see that you're going to be a little taken aback, but the reality is that there's conflicting interests in the health care model. And the foundation for health care is broken because MI. As the consumer, as the person who is going to be cared for, I don't pay for my healthcare. I pay for my healthcare insurance, but a lot of times I do that through either the government through my taxes, or I do that through. My employer. My employer provides that insurance.

And so you hear people say all the time, oh, that's covered by insurance. The almost oh, that's free. It's not free. It's paid for by somebody. And it's quite frankly, it's bankrupting the country. It's bankrupting individuals. At a record pace in the United States. And and so it's broken from that perspective.

The incentives don't work for me to stay healthy. And so we have bad outcomes across the board in terms of health. We have. Significant obesity we have just diabetes. You name it. We have chronic conditions. That are being exacerbated by the fact that people do not take care of themselves.

All right.

They go on, we've been on a long journey. And so that's their incentive is this has to change. The fundamentally has to change. Could be the payment models could be partnerships, could be insurance. It could it, but fundamentally it has to change this. Isn't just a technology play. This is a change in the way we approach healthcare. All right. We've been on a long journey with many important milestones along the way, the publishing of our health assurance thesis in 2019.

Let me give you some of that. They cause Hakko has three areas of focus. Number one, to work with our health system partners, to help them develop and execute their transformation journey. All right. So they want to work with these partners and they have 20 plus that have signed up. To be a part of them today.

So they're going to work with those houses and partners to help them develop and execute on a transformation journey. So they, this acquisition is a model. We're going to acquire one where you're going to transform one, and then we are going to have the blueprint for others to make this transition. We've all known what it's going to take. And what it's going to take is essentially the. The health system has to get the first dollar. If you do not get the first dollar of healthcare, which is essentially the insurance dollar, then. You are not incented for healthcare.

You're present. You're you're incented for sick care. Every time somebody comes in, you get paid every time you do a surgery, they get paid. Every time you do a test to get paid. That's a model that just has led to what it has led to which we've talked about earlier, what you want as a model.

If you're getting that first dollar. You're getting paid to keep the infrastructure, going to keep the lights on, to provide the best care you possibly can for the community, for the entire community. And in those cases, You then can work at keeping that population healthy, keeping them out of the hospital. Is your incentive.

So that first dollar of care is very important. Okay. So they're going to work with our health partners. Number two, to help catalyze the health assurance ecosystem, building an interoperability model with technology and solutions, including a subset of our healthcare portfolio companies to drive this transformation.

So they've been making investments, they're a portfolio company, they're an investment company. They've been making investments, things like transparent and others that they have been investing money in that they're looking at saying, Hey, these are transformation. technologies that are not. Getting enough traction. Maybe they are getting traction, extra transplanters, getting a fair amount of traction.

But some of the companies may not be getting enough traction in the space. And this is an opportunity to show their transformer transformational capability because you now have the ability to showcase some of these technologies to get them in the flow to show that they can actually drive costs out, increase access, and all the things that they're striving to do. All right.

So they're going to, they believe that interoperability and technology. Is part of the solution to this problem. And finally, number three. To acquire and operate health systems for long-term care. For the longterm where we can demonstrate the blueprint of this transformation for the rest of the industry.

So the, they are going to they're going to. They're just going to do it with Summa health, and then they talk about, Hey, we've signed this letter. They talk about the amazing accomplishments as Suna Suma. I'm going to go down to the bottom here, cause this is where we're going to pick it apart a little bit.

Our intent is to build on. And augment the systems, considerable strengths. First and foremost, we share that Summa house commitment to serving all members of the community. Both organizations have pledged to expand access and deliver health. And wellness, collaboratively, compassionately, and courageously for all people.

And with emphasis among vulnerable and underserved populations, Summa health has also demonstrated excellence via its integrated delivery network. Including Summa care. Which is an integral part and will remain. So the Summa health team also shares our belief. That achieving healthcare transformation will require a shift to value-based care.

What we talked about earlier, getting that first dollar. And has already begun to make the transition. Now you can get that first dollar or you can partner for that first dollar, but either way. You have to get that first dollar. I believe. It has already begun to make the transition 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, too. Effectively serve all people in their communities.

We understand that this may be mis-characterized as another private equity deal and it is being mis-characterized as another private equity deal. But it's important to realize that this is fundamentally different kind of partnership and approach in several ways. All right. And so they list a handful of ways.

The focus isn't on taking costs out. It's on putting innovation in. We intend to build modern tech enabled healthcare delivery platform at scale across all points of care. I believe that their intention is to do that by the way. And I believe they have to do that in order to deliver on their objective.

I also believe they will take costs out. I don't know how they will do that, but they will take costs out because they're acquiring an old model. If you acquire an old model. And don't just retrofit something onto it. It's not going to have the outcome that they want. There is going to be. Some culling of. I don't know what aspects just yet, but of the things that don't work, that are broken, that do not add to better access, lower cost and better care for the community.

Plus it's a different model. Value-based care is a different model. And then fee for service. And so if a significant portion of Summa care is based on fee for service or Summa health care, it's based on fee for service that has to be looked at, and there will be some fallout from that. Now I applaud their idea. Build modern tech enabled healthcare delivery platforms at scale across all points of care.

We'll come back to that. We are operating over a longer-term horizon. This is not a quick flip, but a longterm commitment to transformation that benefits the community. Keep in mind that a lot of these private equity deals are real estate plays. This is not a real estate play in any way, shape or form. Cause general catalyst is a healthcare company at its core. And a lot of these private equity companies are real estate companies at their core, or they are essentially wealth management companies at their core.

That's not what this is. So I believe that point a thousand percent. We have a deeply expert in empathetic leadership team, people who understand the opportunities and challenges of delivering care firsthand. Absolutely. They absolutely do that. If you've heard them speak, if you've if you've seen them out in the community, it is a, Mark Harrison formerly with Intermountain health. The passionate, smart individual.

I, and actually I know he has a significant role. I don't know what Steven Glasgow's role is, but again somebody who's been there done that. Has a vision for what healthcare could be and has been out there. Leading in that way. Heymont, Tenasia obviously. Is at general catalyst, I don't know how intricately involved in this specific deal.

He will be. I think that team will run this. And then you have the you have the portfolio companies who are led by, Glen Toman and others who are again, really solid leaders in healthcare and understand healthcare and have been transformative in healthcare. Next, we lead with a people first patient first mantra where the overriding goal is positive, positively transform the patient experience, believing that starting there. We'll have the greatest transformational effect. This is an interesting one. And this is where a lot of health systems get stuck. Because think about the the model that we have today, everything is modeled around the valuable time of the clinician.

The waiting room. And then you go from that waiting room into a room where you sit on butcher paper and you wait for a doctor even more. We do not design health care around the patient much, to be honest with you. And so this is an interesting one and to see how they are going to do this. We'll be interesting while also making sure that their clinicians, that the people delivering care. Feel cared for themselves. That they're valued that they are brought into the transformational process, I think will be important as well. We have an unwavering shared commitment to the principles of health assurance, making care more proactive, accessible, and affordable for all people everywhere. And again, I think that's a great. A set of principles so that when people are doing projects and they're looking at it, they can make sure that it runs through that matrix and comes out the other side and is still serving that objective. But again, the proof is in the pudding.

How do you make that happen? Finally, this is not nicely to transaction, but part of a broader engagement strategy with our wider healthcare ecosystem, innovators and system partners, who will be will collaborate and share best practices. And in which Summa house progress can be an innovation. Beacon for the rest of the industry. Again, I like the acquisition.

Ohio is interesting. Northern Ohio is interesting. To me, it's a good mix. And I think it will be a good model for the rest of the industry. You can look at this integrated delivery network that had a significant amount of fee for service. And if they're able to make that transition over a period of time, I think that will be. The model that the industry is looking for. Since I'm at 14 minutes and these are supposed to be 10 minutes. And I've over.

What I'm going to do is I'm going to come back tomorrow and look at this whole idea of what does the tech stack look like? What do we have to do? I've seen people say the EHR, this and interoperability that and whatever. I'm going to, I'm going to pull this apart a little bit and see if we can't come back with what the tech stack tech model would look like.

I think it looks. A little bit like the insurance. Tech stack at this point, it's a little different than what the traditional healthcare tech stack has looked like. And it'll be interesting. We'll talk a little bit about the emphasis on the EHR. Because we, as an industry place a significant amount of emphasis on the EHR.

And the question comes, do you partner with epic or do you look for the alternative? And that is the million dollar question you don't have to tune in tomorrow to. Here the million dollar question answer. Or at least my version of that answer. All right. That's all for today. Don't forget to share this podcast with a friend or colleague, keep the conversation going. We want to thank our channel sponsors. Who are investing in our mission to develop the next generation of health leaders, short test artists, parlance, certified health, notable and service 📍 now. I check them out at this week. Thanks for listening. That's all for now.

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