Private Payers News

Sentara Healthcare, Cone Health Announce Value-Based Care Merger

The integrated health systems’ value-based care merger continues a trend of slow but continued mergers and acquisitions in the first half of 2020 despite the pandemic.

value-based care, Medicare Advantage, mergers and acquisitions

Source: Getty Images

By Kelsey Waddill

- Sentara Healthcare, an integrated, non-profit health system, has announced a value-based care merger with the nonprofit integrated healthcare network Cone Health.

“Sentara Healthcare and Cone Health are both regional, community-based health systems with similar missions, cultures, strategies and visions for transforming the future of healthcare,” Sentara Healthcare’s press release stated.

“Their joint commitment is simple: to bring together two strong industry leaders into a unified, transformative and value-driven organization at the forefront of change that will be a model for the rest of the nation's healthcare systems.”

Each has at least one health plan integrated into its healthcare system. Sentara Healthcare offers payer products through Optima Health Plan and Virginia Premier Health Plan, which boast nearly 860,000 members across Virginia, North Carolina, and Ohio. Cone Health has a Medicare Advantage plan, HealthTeam Advantage, with 15,000 members.

The two organizations prioritize value-based care models. In particular, Optima Health has been leveraging its Medicare Advantage plan to transition into more value-based care models.

The organizations also place an emphasis on employing digital and virtual care options for patients in order to increase access to care

The healthcare organizations will need to receive state and federal approval through regulatory review. They expect to close the deal in mid-2021 and will take two years to integrate. The combined company’s headquarters will be in Norfolk, Virginia. However, Cone Health will retain a divisional headquarters in Greensboro, North Carolina, its present headquarters.

“In Sentara Healthcare, we've found a like-minded organization who shares our commitment to transforming healthcare. The combined organization will build on our shared commitments and distinct expertise to promote better health outcomes and minimize healthcare costs for consumers," said Terry Akin, chief executive officer of Cone Health.

Payers continue to engage in mergers and acquisitions in spite of the coronavirus pandemic.

For example, some key coronavirus-era acquisitions involved Medicaid plans. Molina Healthcare announced that it would acquire Passport Health Plan’s Medicaid plan when Passport lost its contract with the state of Kentucky. Molina Healthcare also took over Magellan Health, Inc.’s Medicaid plan, Magellan Complete Care.

However, the pandemic did put a damper on the rate of mergers and acquisitions for healthcare service organizations broadly, which were significantly lower than last year’s, a recent PricewaterhouseCooper (PwC) study revealed.

Second quarter mergers and acquisitions in 2020 resulted in 61.7 percent less in deal value than in the second quarter of 2019. The second quarter of 2020 was also was 42.4 percent lower in volume as compared to 2019.

That being said, these levels are not record lows. In fact, the number of deals from the first half of 2020 came in just three percentage points lower than the typical 500 deals.

In terms of value, the first half of 2020 saw much lower value from mergers and acquisitions than usual. However, the PwC study also noted that these numbers are based on what companies have revealed so far, but many healthcare companies only disclose such information retroactively.

The PwC study did not specify how the coronavirus pandemic affected merger and acquisition value and volume for payers specifically. But these numbers confirm a trend in the healthcare system at large toward slower but continued deal-making.

“This rapidly changing healthcare environment requires tremendous transformation and innovation to ensure the long-term success of each respective health system and, most importantly, the very best for those we are privileged to serve,” said Howard P. Kern, president and chief executive officer of Sentara Healthcare.

“We can either react to change, or we can shape it. We are choosing to shape change and will lead this transformation of healthcare together.”