Summa sale update: Is venture capital firm HATCo on track to buy Akron's biggest hospital?

Summa Health’s deal with a venture capital company continues to quietly chug along almost entirely out of public view.

When Summit County’s biggest employer and biggest health care provider announced in January that it had signed a non-binding letter of intent to be acquired by Health Assurance Transformation Corporation (HATCo) , Summa officials hoped the deal would be wrapped up by mid-summer.

It’s not clear at the beginning of July if that timetable will hold.

A half-dozen elected officials contacted for this story said Summa and HATCo have offered no updates since springtime, when company executives faced a barrage of questions and concerns about how a venture-capital driven system would impact local health care.

A Summa spokesman last week would only say the hospital system continues “to work closely with HATCo on the due diligence process and finalizing the definitive agreement.”

If and when that agreement is reached – which would simultaneously turn Summa into a for-profit health system and create a multi-million-dollar charity dedicated to improving local health – it would be submitted to the Ohio Secretary of State for approval.

A spokeswoman with the secretary of state’s office said Monday that Summa and HATCo have not yet submitted anything for consideration.

The only public clue that the Summa-HATCo deal is on track is a hasty move last month by the Ohio legislature to eliminate a possible obstacle by changing state law.

Proposed Ohio law addresses  barbers, cosmetologists and hospital police

Ohio House Bill 158,  initially aimed entirely at updating state rules governing barbers and cosmetologists, included a tacked-on provision that allows formerly nonprofit hospitals to maintain their police forces after they become for-profit entities.

The bill doesn’t mention Summa by name.

But co-sponsor House Rep. Bill Roemer, R-Richfield, said the provision is aimed specifically at Summa.

Roemer said Summa representatives reached out to him a few months ago for help.

Summa, like the Cleveland Clinic and most larger city nonprofit hospitals, has its own police department. It has a police chief and about 25 certified, state-trained police officers who are able to carry guns and make arrests, along with about 80 other security officials, Roemer said.

But Ohio law, as written, does not allow for-profit health systems to have certified police.

“So Summa would have lost that … and obviously, security is very, very important in that stressful environment,” Roemer said.

Police at Summa and Akron General, for example, locked down entrances to their emergency rooms in the chaotic aftermath of the June 2 Akron shooting that injured 27 and killed one.

Without a change in Ohio law, Roemer said, a for-profit Summa would have been forced to shed its police force, dumping all of its law enforcement needs on the Akron Police Department.

That burden not only would hurt response times across the city, he said, but also eliminate additional police resources around Summa facilities because Akron police and Summa police have mutual response agreements.

When Summa reached out for help, Roemer said he offered HB 158.

Lawmakers had been working four years on the bill to overhaul state laws governing barbers and cosmetologists. In 2017, the two boards that oversaw barbers and cosmetologists merged, yet each group still had different Ohio regulations, he said.

HB 158, co-sponsored by Roemer and Melanie Miller R-Ashland, streamlined the regulations and aimed to make it easier to work as a barber or cosmetologist in Ohio.

“Say you’re a cosmetologist in Indiana and your husband was transferred to Ohio, you’d have to be re-certified to work in Ohio,” he said.

The bill changed that, recognizing licenses from other states. It also reduced fines for disciplinary actions and lowered the age to apply for a barber license to 16.

HB 158 was ready for a vote, he said, and lawmakers could add a provision fixing Summa’s police problem.

The add-on was narrow: Nonprofit hospitals that already employed police police officers could continue to employ them after converting to for-profit status.

Roemer said the change could only apply to Summa and two other “tiny” hospitals in the state, but neither of the smaller entities in western Ohio and southeastern Ohio was likely to change its security.

HB 158 passed the House and Senate in June and is headed to Gov. Mike DeWine’s office. The governor is expected to sign the bill into law or let the bill become law 10 days after it arrives at his office, Roemer said.

Summa CEO explains HATCo deal during podcast

In June, Summa President and CEO Dr. Cliff Deveny appeared on a Greater Akron Chamber podcast and explained Summa’s financial dilemmas, its potential future with HATCo and some of the issues a Summa health foundation could target.

More than 125 years ago, Deveny said, two people who came up with the idea of Akron City Hospital envisioned a place where anyone could come through the doors and receive care, regardless of whether they could pay.

“And that has been our mission,” he said.

But now, three out of four people who come to Summa can’t cover their costs, either because government insurance doesn’t match the true cost of care or other reasons.

“I think we're scrappy, like a lot of people in Akron are and that we make it work, we figure out ways to provide the care,” said Deveny, who grew up on Merriman Road. “Going forward, we are getting to the point now where it's getting tougher and tougher, and what you're seeing is balance sheets are really starting to shrink as a result of that reality of labor costs, or the different just realities.”

Before the pandemic, starting nurses at Summa earned $20 an hour. Now that’s $34, he said. All labor costs have risen, he said, including the starting minimum at Summa, which is about $20 per hour.

At the same time, hospital admissions – which were the economic engine for health care systems for 50 years – are no longer profitable.

“So every time somebody gets admitted to the hospital, typically a Medicare patient … you're losing money on every one of those” because Medicare doesn’t pay enough to cover the cost, he said.

Many hospital systems across the U.S. have merged or partnered with other systems to try to adapt to the changing economics.

Summa has tried that, too. Mercy Health had a 30% stake in Summa for seven years. Summa also had joint ventures with Western Reserve Physicians and Crystal Clinic. In 2018, Summa was poised to merge with Beaumont, a Michigan system that would have moved Summa’s headquarters out of state.

But the pandemic upended the merger and Beaumont was later absorbed by another health system, he said.

“And so here we are. We're Summa on our own, and we've done well. We've grown considerably because community need has grown,” Deveny said.

But, he said, it’s not sustainable.

The board, he said, is looking out 10 to 20 years and asking, “How are we going to maintain our mission?”

A couple of years ago, Deveny was introduced to Dr. Marc Harrison, who raised his family in Northeast Ohio and recently joined the venture capital firm General Catalyst to launch HATCo.

General Catalyst already had a track record of transformation in different industries.

“You used to have to only go to a hotel, and now you can go to Airbnb, right? You can have a different experience, more affordable,” Deveny said.

Same with eyeglasses, he said.

“You  used to … go to an optometrist office, sit in a waiting room, wait the whole process. And now you can go to a thing called Warby Parker,” he said. “You can buy glasses online, laying in your bedroom.”

General Catalyst was involved in these and more transformations that Deveny said improved “the experience, the affordability, the accessibility” of services.

Deveny said people in the company asked why they couldn’t bring the same transformation to health care.

They formed a consortium of academics and hospitals, including Cleveland-based MetroHealth and Cincinnati Children’s Hospital, Deveny said. They then brought in Harrison to run it and to buy a health system with an insurance plan, which turned out to be Summa.

When Deveny met Harrison, he was skeptical.

“I thought he was crazy, and I thought, ‘Why would we do that, right?,” Deveny said. “And after six months of conversations, we introduced him to our board chair, and that conversation improved or got clear.”

Summa doesn’t have the money to rebuild and replace things the hospital needs and invest in rapidly changing technology, Deveny said.

HATCo does.

Deveny: Why the Summa sale isn’t a typical venture capital deal

Venture capital companies have been buying up hospitals across the country in recent years, owning more than 400 in 2024.

Critics say these private equity companies cut costs, reduce staff and take the profits.

During the podcast, Deveny cited Steward Health Care, owner of Trumbull Regional Medical Center in Warren, which filed for Chapter 11 bankruptcy earlier this year.

The Summa acquisition is unlike any other venture capital purchase of a nonprofit hospital to date, both Deveny and Harrison have insisted.

“I think it's up to the folks at HATCo … to really prove these in that they are different,” Deveny said.

“What the belief here is that through very strategic investments and empowering the workforce of folks here in Akron, and giving them the technology tools, giving them the dollars, we can make Summa more sustainable,” Deveny said.

The margins of profits for HATCo are likely to be just 1% or 2%, he said.

“That's not going to make anybody rich,” Deveny told the podcast.

The goal is to stabilize Summa, to make it sustainable.

Health systems around the world – from India to the United Kingdom – are watching what’s happening at Summa, he said.

“They want to have solutions … how do we make it more affordable? How do we improve access, all those types of things,” Deveny said, adding that people from around the world will likely drop in on Summa to see what’s changing after HATCo’s acquisition.

He anticipates new companies will also sprout in Greater Akron to serve what’s happening at Summa.

AI, other new technology coming to Summa

Deveny said Summa’s primary care physicians are already experimenting with technology called “ambient listening.”

Technology, he said, listens to what’s happening during patient care and fills out all of the forms and information that primary care doctors, nurses and others usually type in during appointments and patient check in.

That frees Summa staff to look patients in the eyes during their care. And the transcripts captured by technology, he said, are more accurate.

“We've been trying that out, and we've been trying to mess it up by, you know, switching sentences around, having weird conversations, using different dialects, all those things. “But the fascinating thing is, with artificial intelligence, using ambient listening, it can very accurately pick up all the relevant information, document it, code it and then send it for reimbursement.”

Most people don’t know that Summa physicians spend 30 minutes to 2 hours per night at home typing and filling out charts, which is a source of physician burnout.

Summa also is using artificial intelligence to identify early-stage  lung cancer and to identify people at risk of having a stroke even though there’s no evidence of it.

Beyond medical care, new technology will likely change hospital administration.

“You can take a bot, but you turn it into almost like a human meme, where they know the whole internet, they know your whole medical history,” Deveny said. “They can do admissions, they can do discharge planning, they can do care coordination, they can do scheduling, they can do all kinds of things.”

How new foundation from Summa sale could help Greater Akron

At the same time these changes are happening inside the Summa health system, a spin-off Summa health foundation will concentrate on life issues that impact the overall health of the community.

Deveny said people miss 600 appointments per month at Summa because their ride didn’t show. Other patients, he said, are homebound.

“And so what happens is they miss a $35 copay primary care visit, and then they get sicker,” Deveny said. “And what ends up happening? They called 911, and they have a $10,000 emergency visit. And so the community pays.”

The foundation could look for ways to help with that, or with the housing crisis in Summit County.

Behind his house in downtown Akron, Deveny said, there are 100 or 150 people living in tents.“We have a very old housing stock, and there needs to be better solutions for that,” he said, pointing to Denver and other cities that have turned to tiny houses to provide shelter to the un-housed.

Akron is changing, Deveny said.

“I think there's a little bit of mourning for the way it used to be and we need to embrace that and celebrate that as well, but then keep moving forward,” Deveny told the podcast.

Akron, he said, has great potential.

People “have great ideas, and what they need is mentoring,” Deveny said. “They need investment. They need people to help guide them” and to trust them to move ahead.

Got questions for Summa about the HATCo acquisition? Get answers from the CEO

Want to ask Deveny questions about the HATCo acquisition of Summa or the future of the foundation it creates?

Akron City Councilman Johnnie Hannah has organized a public meeting with Deveny 6-8 p.m. July 18 at the East Akron Community Development Corp., 550 S. Arlington St.

This article originally appeared on Akron Beacon Journal: Summa sale update: Is venture capital firm HATCo on track to buy Akron's biggest hospital?