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Risant Health sets its sights on a second acquisition: Cone Health

Jun 24, 2024

After finalizing the acquisition of Danville, Pa.-based Geisinger on March 31, Risant Health — the nonprofit organization Kaiser Foundation Hospitals formed last year to increase access to value-based care and coverage — has signed a definitive agreement to acquire another health system: Greensboro, N.C.-based Cone Health.

The plan from the start was for Risant Health to acquire four or five regional or community-based health systems in addition to Geisinger over the next several years. Risant Health’s goal is to achieve total revenue of between $30 billion and $35 billion, according to company officials.

Cone Health is a nonprofit health system with four acute care hospitals, a behavioral health facility, three ambulatory surgery centers, eight urgent care centers, more than 120 physician practices, an accountable care organization (Triad HealthCare Network), and a health plan.

According to the announcement, Cone Health has 13,000 employees and more than 700 physicians, along with 1,800 partner physicians. The health system serves over half a million people in the Piedmont Triad — Greensboro, Winston-Salem, and High Point, N.C.

“Cone Health’s impressive work for decades in moving value-based care forward aligns so well with Risant Health’s vision for the future of health care,” said Risant Health’s CEO, Dr. Jaewon Ryu. “Their longstanding success and deep commitment to providing high-quality care to North Carolina communities make them an ideal fit to become a part of Risant Health.”

“Becoming part of Risant Health presents a unique opportunity to shape the future of health care in the Triad, the state, and across the nation,” said Cone Health’s president and CEO, Dr. Mary Jo Cagle. “As part of Risant Health, Cone Health will build upon its long track record of success making evidence-based health care more accessible and affordable for more people. The people across the Triad will be among the first to benefit.”

Cone Health recorded $2.7 billion in revenue in its most recent fiscal year, The Wall Street Journal reported. Kaiser Permanente, by comparison, recorded $101 billion in 2023.

Financial details of the agreement were not provided, though Risant will invest an undisclosed amount into Cone Health.

The acquisition is subject to regulatory approvals and customary closing conditions. The organizations anticipate completing the transaction early next year, according to Modern Healthcare.

If the acquisition is finalized, Cone Health will continue to operate independently, retaining its name, brand, board, and leadership team. Dr. Cagle said two of Risant Health’s board members would join Cone Health’s board, and a board member from Cone Health would join Risant’s board, Modern Healthcare reported.

Our Take: With this second proposed acquisition, it’s clear that Kaiser/Risant’s strategy is to focus on health systems that not only have substantial experience in value-based contracting but also have demonstrated solid quality and financial performance — and from that standpoint, choosing Cone Health makes a lot of sense.

Back in 2012, Cone Health signed a long-term management services agreement with Charlotte, N.C.-based Atrium Health (which was replaced with a strategic services agreement at the start of 2020). According to our research at Darwin, from a value-based perspective, Cone Health was the most advanced health system of those affiliated with Atrium Health (which became part of Advocate Health in December 2022).

Cone Health has been a proponent of value-based care since at least 2010, when it created the Triad HeathCare Network (THN) as a provider-led partnership between the health system and community physicians.

When the Medicare Shared Savings Program began in 2012, THN was among the first accountable care organizations to participate. THN subsequently transitioned to the Next Generation ACO program, then to the Direct Contracting Model, and is currently participating in the ACO REACH Model. According to the acquisition announcement, THN manages and coordinates care for nearly 200,000 patients.

Across all of the ACO models, THN has performed extremely well in terms of both quality and shared savings. THN has commercial ACO agreements with all of the major payers.

Moreover, at the start of 2016, Cone Health began offering Medicare Advantage coverage through a Medicare Preferred Provider Organization (PPO) subsidiary that conducts business as HealthTeam Advantage (HTA). In September 2022, Novant Health acquired an interest in HTA, a move that added Novant’s providers to the PPO’s network. Cone Health continues to be HTA’s majority shareholder.

Earlier this year, the health system established the Cone Health Center for Value-Based Care with an aim to further integrate value-based care practices throughout the organization while improving patient outcomes and reducing unnecessary services and costs.

As mentioned, Cone Health ended its management services agreement with Atrium in 2019, replacing it with what it called a strategic services agreement. In actuality, by terminating the management agreement, Cone was pulling away from a previously tight relationship. And as a sign of things to come, Cone executives went to war over a new hospital in Greensboro proposed by Atrium Wake Forest Baptist in April 2023, which would also add a 20-bay emergency department.

In an op-ed in the Greensboro News & Record at the time, Dr. Cagle noted her concern about duplication of services and a reduced quality of care, as the Certificate of Need process began.

“… Atrium’s proposed Greensboro hospital will be a way station to Winston-Salem for those needing more than basic health care,” Dr. Cagle wrote. “The economic impact will follow.”

The battle continued in public over the next year, with numerous appeals to the public.

Then suddenly, last month, it appears that the parties may have resolved their disagreement, according to a report in the Triad Business Journal.

The timing may be coincidental. But moving on from the protracted disagreement was likely a minor prerequisite to sealing the Risant deal.

We don’t speculate much here. But it looks like Sioux Falls, S.D.- based Avera Health — or Sanford Health, its closest competitor — is next. Avera is a fully integrated health system with experience in value-based contracting, including a Medicare ACO with two-sided risk, and offers commercial and Medicare Advantage health plans. Its Avera eCare telemedicine unit is one of the largest and best deployed virtual health units in the country.

For those of you who are familiar with our ranking system, Avera Health is also in the top decile of the Darwin Value Index, of more than 350 health systems we have scored. (For that matter, so is Kaiser, Geisinger, and Cone Health.)

And geographically, Avera Health has virtually no overlap with Cone Health or Geisinger, which would make anticompetitive grumblings from the Feds moot.

If not Avera Health, then who? Our short list also includes Ochsner Health, HealthPartners, and right here in Maricopa County: Banner Health.

Stay tuned. This is exciting.

Health Care Rounds #168: Working with IDNs: The Pharma Perspective

In this episode, Matt Portch joins John to explore the evolving collaboration between pharmaceutical companies and Integrated Delivery Networks (IDNs). Additionally, Matt sheds light on how both have adapted to new technologies and market shifts. Matt is a seasoned pharmaceutical executive with successful sales and market access experience at Sunovion Pharmaceuticals, Pfizer, and Bristol Myers Squibb. Now available on YouTube, as well as anywhere you get your podcasts.

What else you need to know

Amazon has expanded its RxPass drug subscription program to Prime members with Medicare coverage. For a flat fee of $5 a month, eligible members have unlimited access to 60 commonly prescribed generic prescription drugs, which Amazon will deliver free of charge. The program, which Amazon launched in January 2023, also gives members access to a pharmacist around the clock. Amazon wrote in a news release that Medicare beneficiaries who take at least one of the drugs available through RxPass could save an estimated $70 per month. Those who take multiple drugs offered through the program could save more. The subscription service is available to Medicare members in all states except California, Minnesota, Texas, and Washington. Prime memberships cost $139 per year, and the RxPass program adds another $60 per year to that fee. Rx Pass is separate from Amazon’s Prime Rx program, which provides Prime members with discounts of up to 80% on generic drugs and 40% on brand-name drugs at participating pharmacies when they pay without using insurance coverage.

Winston-Salem, N.C.-based Novant Health is giving up on its plans to buy two hospitals from Franklin, Tenn.-based Community Health Systems. In February 2023, Novant agreed to acquire Lake Norman Regional Medical Center, Davis Regional Medical Center (which was converted to a psychiatric hospital in May 2023), and other related assets from CHS for $320 million. The Federal Trade Commission filed a lawsuit in January to block the deal, asserting that it threatened to “raise prices and reduce incentives to invest in quality and innovative care.” Although a district judge denied the FTC’s motions for injunctions earlier this month, an appellate court subsequently granted a temporary injunction pending final resolution of the FTC’s appeal. Rather than going through what could be a years-long appeals process, Novant notified CHS that it would not move forward with the acquisitions.

Irving, Texas-based Christus Health signed an agreement with Abridge to deploy Abridge’s generative AI solution for clinical documentation throughout the health system. Abridge, based in Pittsburgh, said in a press release that Christus Health provided “overwhelmingly positive feedback” following a pilot program launched earlier this year to study the solution’s impact on clinicians. According to Abridge, clinicians spent an average of 60% less time on documentation outside of work hours. They also saw a 40% decrease in physician burnout rate and a 41% increase in being able to give undivided attention to patients. Dr. Myriah Willborn, a family medicine physician with Christus Trinity Clinic in Corpus Christi, called the Abridge solution a “game changer.” Dr. Timothy Barker, Christus Health’s ambulatory chief medical information officer, said he believes the solution will “transform clinical practice” for the health system’s ambulatory physicians. “It is going to be more transformative than anything I have seen in the last 20 years,” Barker said. “Time and time again, physicians have told me that Abridge is ‘life changing.’” Christus Health operates more than 600 care locations and has 15,000 physicians.

Spending in the 340B Drug Pricing Program increased 19% annually from 2010 through 2021, according to a new report from the Congressional Budget Office. Through the program, qualifying hospitals and clinics that serve low-income and uninsured patients can purchase certain drugs at a discount of 25% to 50% from their list price. Spending on cancer drugs, anti-infective agents, and immunosuppressants accounted for 70% of total spending in the program in 2021, up from 58% in 2010, the report shows. The lion’s share of the increase in spending, 73%, was attributed to those three drug classes. Other factors that “probably contributed” to increased spending, according to the report, were the integration of hospitals and clinics, expanded participation resulting from the Affordable Care Act, and expanded use of contract pharmacies. Nearly 20% of the growth in spending was attributable to spending on drugs dispensed at contract pharmacies.

Cleveland-based University Hospitals will lay off 300-plus employees, with more than 10% of those affected holding leadership positions, according to Becker’s Hospital CFO Report. Dr. Paul Hinchey, the health system’s chief operating officer, said rising costs of supplies, labor, and purchase services, combined with reduced Medicare reimbursement rates, have created “significant downward pressure” on the health system’s revenue. Becker’s noted that University Hospitals’ revenue increased nearly 9% year over year, as a result of changes such as increased access for patients and the implementation of a new electronic health records system. Dr. Hinchey said in spite of the health system’s efforts “and being successful in growth, that downward pressure on revenue and the increasing prices is pinching our margin.” He added, “We … recognized we needed to get our cost structure down.”


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