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Providence CEO: 'Old-school M&A is dead'

November started with a flurry of hospital mergers and acquisitions.

From Franklin, Tenn.-based Community Health Systems striking a deal to sell a Mississippi hospital, to Gulfport, Miss.-based Memorial Health System, to the University of Alabama at Birmingham Health System Authority acquiring Ascension St. Vincent's Health System, at least 11 M&A moves have been reported by Becker's since Nov. 1.

An Oct. 31 report published by Cain Brothers, a division of KeyBanc Capital Markets, also showed that third-quarter hospital M&A deals increased 79% over the second quarter of 2024 and 25% over the third quarter of 2023.

Amid all the M&A activity, Renton, Wash.-based Providence, a $30 billion health system that operates 51 hospitals and more than 1,000 clinics across seven states, takes another perspective.

"Old-school M&A is dead," Providence President and CEO Rod Hochman, MD, said Nov. 11 at Becker's 12th Annual CEO+CFO Roundtable. 

He considers "old-school M&A" as merging with another health system to take on its hospitals.

"Providence is not looking at taking ownership of other hospitals as a key strategy, because we don't think that's what the future of health and healthcare is going," Dr. Hochman said.

Instead, Providence is focused on transformation through collaboration with other companies and insurers. Take Longitude Health, for example. 

In October, four major nonprofit health systems launched Longitude, which aims to "tackle head-on the most impactful challenges and opportunities in the healthcare industry." 

The founding members of Longitude are Providence, Dallas-based Baylor Scott & White Health, Winston-Salem, N.C.-based Novant Health and Houston-based Memorial Hermann Health System. Paul Mango, who previously served as chief of staff at CMS and deputy chief of staff for policy at HHS, will serve as Longitude's CEO. 

In addition to Longitude, Providence, while staying in acute care, seeks to expand in the ambulatory care space and has forged a revenue cycle partnership with R1.

"We're talking about ambulatory centers. We're partnering with R1 on revenue cycle," Dr. Hochman said. "We think all of those — the 2.0 version of M&A — is where the future is. Not in [the] traditional [way of] get[ting] bigger by acquiring other health systems and hospitals. That's our point of view.

"That's why we think Longitude is important because you can create solutions with other health systems without having to merge with them."

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