The more than seven-year partnership between Summa Health and HealthSpan Partners, a division of Bon Secours Mercy Health, will end two years ahead of schedule, according to an announcement released Wednesday, Dec. 30.
The investor relationship began in September 2013 when HealthSpan, a secular auxiliary organization of Bon Secours, the fifth-largest Catholic health system in the country, bought a 30% stake in Summa for $250 million.
The separation takes effect Jan. 1, 2021. The relationship was scheduled to last until the start of 2023, if not extended. Dr. Cliff Deveny, president and CEO of Summa, said the health system paid an undisclosed amount to HealthSpan early Wednesday to end the partnership.
Deveny said in a phone interview with Crain’s that the separation will not significantly hurt the Akron-based health system’s fiscal position.
“When the investment was made in 2013, Summa was not in the shape it is today,” Deveny said. “We are in a much better situation today. Summa has actually fared relatively well in 2020 and has maintained a positive bottom line through this whole process. This transaction does not put us in any kind of situation of desperation.”
Summa in its most recent financial disclosure statement, for the six-month period that ended June 30, 2020, reported operating income of $1.735 million. That was down from operating income of $23.8 million for the like six-month period of 2019, reflecting the heavy toll of COVID-19 on health care systems. (You can go here to access the report.) Summa said in the report that during the second quarter of 2020, it “received distributions of approximately $20 million from the Coronavirus Aid, Relief, and Economic Security (CARES) Act, advances associated with the Medicare Accelerated Payment Program of approximately $44 million, and deferred payment of employer taxes of approximately $7 million.” In addition, Summa said, it “obtained a revolving line of credit in the maximum principal amount of $100 million. In May 2020, Summa Health withdrew the full $100 million on the line of credit.”
Deveny said in Wednesday’s phone interview that Summa is not actively looking for another partner. A plan to partner with Southfield, Mich.-based Beaumont Health fell through in May as the COVID-19 pandemic disrupted health care systems across the country. The proposed deal, which had already received all necessary regulatory approvals, would have created a nonprofit system with 12 hospitals and $6.1 billion in annual revenue.
“Bondholders, rating agencies, any kind of regulatory organization are not requiring us to go find a partner or do anything like that,” Deveny said.
“There’s nothing active going on, but you know, all organizations are constantly looking out constantly as to what is the best situation to meet the needs of the community,” he said. “Right now, there is nothing.”
Bon Secours president and CEO John Starcher wrote in a letter to employees earlier in 2020 that COVID-19 has had an unprecedented impact on the health care industry and that the system projected operating losses of $100 million per month, forcing a hiring freeze, wage freezes and the furloughing of employees.