Venture capital firm General Catalyst’s Health Assurance Transformation Corporation (HATCo) signed a definitive agreement to buy Summa Health for $485 million, the organizations announced Thursday.
The purchase price, when added to Summa Health’s current cash, will enable the health system to eliminate $850 million in existing debt, according to a press release.
The organizations said the remaining cash, after closing adjustments, will fund a new, separately governed community foundation that will support focused investment to benefit community health in the greater Akron region.
The transaction is subject to regulatory review and approval.
HATCo has also committed to $350 million in capital funding in the first five years to upgrade technologies and infrastructure and another $200 million over the first seven years for strategic investments.
General Catalyst made waves in October 2023 when it announced the launch of HATCo to provide advisory services to health systems with ambitions to buy a hospital system. Three months later, General Catalyst announced its intent to acquire Akron, Ohio-based Summa Health.
Summa Health is among Ohio’s largest integrated healthcare delivery systems. It spans two acute care hospital campuses, 15 community medical centers, a rehab hospital, a health insurance arm, a multispecialty group practice and a research and medical education program. It employs more than 8,000 people, according to its website.
Under the terms of their agreement, Summa Health would become a wholly owned subsidiary of HATCo and effectively end its longtime nonprofit status.
“As part of HATCo, Summa Health will be better positioned to build upon our existing strengths and capabilities while also benefiting from new opportunities and technology. Our goals are to expand access to care and improve the experience for our patients, providers and staff,” said Cliff Deveny, M.D., Summa Health president and CEO, in a statement. “This is only the beginning of our long-term journey together.”
Summa Health will maintain its charity care policy, community benefit and essential services it currently offers while focusing on sustainable growth and enhanced access to care for people across the region, according to executives.
The health system’s employees, providers and leadership team will transition to the new entity, according to Summa Health.
“Our focus is on creating new and expanded opportunities for Summa Health, the communities it serves, and its talented workforce,” said Marc Harrison, M.D., co-founder and CEO of HATCo, in a statement. “I am proud of the strong collaboration our teams have demonstrated over the past several months, and we look forward to continuing to work together to develop a plan that optimizes operational stability, while positioning Summa Health to drive meaningful transformation in the years ahead.”
Teams at Summa Health and HATCo worked together through a “thoughtful, thorough due diligence process to define the terms of the agreement,” said George Strickler, chair of Summa Health’s board of directors. “This opportunity with HATCo puts us in a stronger position to navigate headwinds, transform the health system and create a sustainable path forward to better serve our people, our patients and our communities,” he said.
Summa Health and HATCo are submitting applications related to the proposed transaction to all required regulatory bodies including the Ohio attorney general, the Ohio Department of Insurance, the Federal Trade Commission and other applicable authorities in compliance with regulatory review processes.
General Catalyst’s investment in Summa Health creates a “blueprint for the future of healthcare delivery,” said Hemant Taneja, CEO of General Catalyst and founder and executive chairman of HATCo.
“We couldn’t be more excited for the opportunity to execute on that transformative vision together with Summa Health and our innovation ecosystem to make healthcare a more proactive, affordable, and equitable system of care,” Taneja said.
A blog post penned by Harrison and Taneja back in January sought to address concerns that the purchase “may be mischaracterized as another ‘private equity’ deal” similar to those that have generated critical media reports and policymaker scrutiny.
HATCo and Summa Health “are operating over longer time horizons,” meaning that the purchase “is not a quick flip but a long-term commitment to transformation that benefits the community,” they wrote. The firms’ focus “isn’t on taking costs out” but rather on introducing innovations to the health system such as “modern, tech-enabled healthcare delivery platforms at scale, across all points of care,” according to the blog.
Summa Health and its subsidiaries reported almost $1.8 billion in total revenues, gains and other support across 2022 and an operating loss of $39 million, according to financial documents. Across the first nine months of 2023, it has reported a $37 million operating loss (about $16 million worse than the period a year prior).
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