General Catalyst’s subsidiary, the Health Assurance Transformation Company (HATCo), agreed to buy Summa Health, an integrated Ohio healthcare system, for $485 million. The company said last Thursday that the deal would be confirmed after the news that the company purchased it, but now came the term of finance.
Summa Health is headquartered in five northeast Ohio counties and offers more than 1,000 inpatient beds and supports a network of hospitals, community health centers, and a multi-specialty group practice. The health system had about $859 million in debt as of September 30. Summa will reduce its debt by $850 million, combining the proceeds from the sale with its available cash.
This is a big step for General Catalyst, as it is the first time that the venture capital industry has ventured into hospital ownership. However, HATCo’s leadership has been clear that this is not about restructuring or cost-cutting at Summa but about driving new revenue streams through innovative technologies and care models. This, according to Dr. Marc Harrison, CEO of HATCo, in a January interview is not about rescuing a distressed system but enhancing its long-term growth and sustainability.
To support these efforts, HATCo will invest $350 million in capital over the first five years, focusing on technology integration and improving Summa’s operational capabilities. Another $200 million will be allocated over the next seven years for strategic and transformative investments in the health system.
HATCo will look for mature technology solutions from a variety of companies, not only from General Catalyst’s portfolio. This will ensure that the health system benefits from proven technologies rather than early-stage startups.
The acquisition will transition Summa Health from the status of a not-for-profit organization to a for-profit company. The balance of the acquisition funds shall be used in establishing a community foundation focused on health for Akron, furthering the organization’s commitment to community health priorities. However, in light of all these changes, the leaders of Summa emphasized that the core mission of the organization would not be altered and that the employees and providers of the system would adjust easily to the new configuration. The deal awaits regulatory approval.
