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In COVID-19, High Stakes, Issue Navigation, Quick Think

Navigating Fallout from the Johnson & Johnson Vaccine Pause

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When the CDC and FDA announced the recommended pause in use of the Johnson & Johnson COVID-19 vaccine, healthcare marcom teams were forced into overdrive, along with their operational and clinical colleagues. The announcement has had instant ramifications for patients and healthcare providers alike. It is causing fear among the 6.8 million people who have already received the J&J vaccine. It is confounding distribution of the J&J vaccine. It is perpetuating and reinforcing vaccine hesitancy. And, it is adding one more burden on an already-fatigued healthcare workforce.

Even as this story continues to develop and the list of things we don’t know runs long, we do know that your staff and patients have questions. And that doctors, nurses and provider organizations are the ones to answer them because they are the most trusted voices when it comes to speaking on healthcare issues. It’s wise to activate them in this moment.

As you communicate with your community and your employees, keep these seven actions in mind.

  • Be proactive, even aggressive. Pausing J&J vaccination administration comes at a pivotal moment in pandemic response. While this news is damaging, we should focus on the merits of other available vaccines to stave off an overall increase in hesitancy. As you craft your communications, lean into the rigorous safety precautions and robust real-world data cited by the CDC and FDA to instill confidence in the Pfizer and Moderna options. Don’t take on the responsibility of vouching for J&J’s safety. Do share, without minimizing the significance of the blood-clotting cases, that it was six cases out of 121 million Americans receiving any COVID-19 vaccine. That illustrates the extraordinary focus federal agencies are placing on safety. The adverse effects are frightening, yet, as one person we spoke with said, their discovery in the context of the J&J vaccine “is a testament to how effective our vaccine monitoring system is.”
  • Prepare your people. Your physicians and nurses will be peppered with questions about the J&J vaccine – from patients who’ve gotten one, to those who were signed up to receive one, to others who are reluctant to get vaccinated at all. Develop your talking points and FAQs to distribute across your organization, along with processes to ensure your entire system is providing a consistent message.
  • Centralize the inbound inquiries. Part of preparing your people is to avoid unnecessarily burdening them. Yes, educate your clinicians to answer questions. But also build out scalable systems to distribute information and respond to questions. Consider a call center to address frequently asked questions and handle scheduling changes. Post FAQs and your policies on your website and other digital channels.
  • Activate your government relations team. Reach out now to your state officials for the latest on their recommendations, requirements, next steps and timing. We’ve seen a patchwork of state requirements at every stage of the pandemic, and there’s no reason to believe this will be any different. Keep the lines of communication open with officials so that you can respond to whatever they say and do next.
  • Don’t get out ahead of government agencies. This isn’t the time to take an action before the CDC or your governor’s office mandates something else. You’ll be fielding enough questions as it is. Don’t put yourself in the position of having to explain why your decisions diverged from later guidelines. In addition, be mindful to balance communicating effectively on this issue while still upholding the CDC and FDA as owners and arbiters of vaccine safety.
  • Tune into your channels. This is a hot issue. People are talking. Keep a close eye on your social media accounts. Make sure your marcom and patient relations teams are listening across all your channels to flag questions or concerns and, as necessary, escalate them.
  • Be prepared to communicate about this. A lot. It’s not going away and, despite our best efforts, will likely affect the overall perception of the COVID-19 vaccine campaign. Questions and concerns will continue. Listen for clues that certain subpopulations (in this case, particularly women of childbearing age) may need tailored communications if they are ever found to be at greater risk for side effects.

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In High Stakes, Strategic Positioning

Digital Digest: The Q1 Lowdown on Digital Healthcare Marketing

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Over the last year, healthcare marketers have run from thing to thing to keep up with the constant changes at their organizations.

There’s been no time to pause for breath and look out past today. But it needs to happen now, especially as the attention returns to the patient experience.

Here’s what I’m tracking as our industry shifts towards consumerism.

Telehealth

Patient acquisition is key. It’s not only important to get patients to come back to bricks-and-mortar facilities, but also time to look at your new telehealth offerings to ensure the patient experience around those is rock solid. While telehealth visits are expected to drop off somewhat, they should stay well above 2019 levels. Providers need to be looking at the patient population who wants to use telehealth and ensure they have access. For example, to get around the issue of lack of broadband access where patients live, providers may consider partnering with community organizations to provide physical facilities where people can have a remote visit.

Marketing the Experience

The other part of telehealth today is ensuring that providers give their staffs and physicians the tools they need to deliver the best possible experience through remote visits. What does bedside manner look like via iPad? Are front desk teams ready to answer questions about remote visits and to direct people to scheduling tools? Are those tools easy to use?

Similarly, marketing teams need to be sure they’re not marketing a bad experience. Providers have been so focused on getting people back for needed care that it’s easy to bypass the “patient journey” and just push people to get something on the books. It’s certainly not a great idea to encourage people to sign up for an appointment when there are no appointments available for six months. Or to push people towards a telehealth system that isn’t user-friendly. Or to providers who aren’t as comfortable with virtual visits. Marketing teams need to dig through those pieces, then inform the operational decisions and create marketing plans that reflect the realities of the telehealth program.

Easy Information

People want information and they want it now. An “I should be able to do everything online” attitude is fueling angst among consumers when it comes to healthcare. Because people want a frictionless experience across their digital lives, they’re steering toward companies and products that deliver consistent, easy-to-use tools. Healthcare providers should be thinking about what that looks like via their website, social channels and visibility on search engines.

We’re seeing a shift towards the use – and success – of chatbots to deliver information. They let people ask a quick question and get a quick answer for basic things like parking, scheduling and billing. The same goes for Twitter help lines: People would rather tweet and get the issue fixed, quickly.

In another area, Google works very hard to keep people on the search results page. Google something about DIY kitchen plumbing and you’ll see knowledge cards with a list of steps, YouTube videos that play right on the page and links to flanges and disposals from local stores. Those results didn’t appear by chance – they’re the result of intentional work by the content creators or marketing teams to optimize their websites. Hospitals should do the same thing…maybe not creating videos for a DIY appendectomy but looking at frequently-asked questions and developing Google-optimized content to answer them.

Internal Comms

The last trend I’m tracking today is the re-envisioning of “internal communications.” When work became virtual for many one year ago, “internal” communications came to mean something different. Healthcare providers have developed more flexible ways to interact with employees no longer physically co-located, especially for things like daily updates or vaccine information. That’s a great start. Now there’s a need to reach employees with important but less-urgent information. Marketing and communications teams need to think about the way their intranets are structured, how regular CEO updates are developed and delivered and what the quarterly townhall meeting looks like.

Providers are interested in connecting with employees through their mobile devices and communicating through text messaging. With many not coming back to the office soon, if ever, providers need to change the way they think about creating two-way communications with employees.

Healthcare is a highly trusted industry. A recent Jarrard Inc. survey showed that doctors, nurses and hospitals all enjoy well over 80 percent trust among the public. Consumers trust doctors more than their insurance company for accurate information on the price of healthcare services, and they’re more likely to call their doctor’s office than their insurance company for that information. Patients want to hear from you.

Beyond that, we know that information related to cost of services is important to consumers. According to our survey, two-thirds reported that the cost of healthcare services impacts where they choose to receive care. Meanwhile, almost four in ten consumers have used a price estimator in the last 12 months.

Here’s the bottom line: Now is a great time to leverage the trust patients and consumers have in providers. It’s an opportunity to connect with patients beyond a single visit or course of treatment. They’re looking for safety, security and transparency. Be the organization that provides it. You have everything to gain.

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In COVID-19, High Stakes, Issue Navigation

Running Through the Tape

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Spring is here, vaccines are out of freezers and in people’s arms, public venues are reopening and Krispy Kreme is handing out free donuts. Meanwhile, the CDC is still telling us to keep our masks on, the headlines look very pre-pandemic (and not in a good way) and new COVID-19 cases are twitching back up. So…are we allowed to be optimistic yet? In the latest with Kim Fox and Tim Stewart, we get real about “Hanxiety” and how far our obligation to others goes. We also talk about how our friends at hospitals and health systems can leverage the trust they have and help push us towards the bright sunny optimism that we’re all looking for.

Be sure to listen and subscribe to the podcast on Apple Podcasts or Spotify.

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In High Stakes, Strategic Positioning

Price Transparency: Two Months Down and Seven Ways to Get Smart

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So, how’s it going 60-plus days into price transparency? Fine for some, not well for others.

As January 1st came and went, we didn’t see a lot of public attention on how providers were responding to the new CMS rule. That’s understandable, given everything else going on in our country at the time: COVID-19 cases peaking, vaccines rolling out, the inauguration, among others. Now, however, price transparency is starting to have its moment.

Let’s begin with some background. The CMS Price Transparency Rule has two requirements: Hospitals must share their charge data in a single, machine-readable file, and they must display at least 300 shoppable services online. If they don’t, they’re subject to a $300 penalty for each day they don’t meet the requirement.

Though we’ve not seen much CMS enforcement yet, we are beginning to see investigative reports from the media on who’s compliant, who’s not and price comparisons of who’s charging what.

A study from Health Affairs (and covered by Modern Healthcare) found that 65 of the 100 hospitals reviewed “were unambiguously noncompliant.” And that noncompliance took several forms, including 12 hospitals that failed to post any data at all. To be clear, this wasn’t a complex academic study where statistics could be used to uncover obscure results. Instead, it was very much in the spirit of the rule – making price information accessible to consumers – where the authors simply performed “a google.com search for “[hospital name] standard charges.”

Another article from Modern Healthcare noted that most Tennessee hospitals are struggling to comply, with only about 20 percent meeting the new rule. Making things worse, where data was available, the report unveiled significant variation in the price of services across Tennessee providers. A knee replacement, for instance, ranged from $10,536 to a $104,120. Similarly, across the state, negotiated rates and cash prices varied up to ten-fold depending on the facility and payer.

Brace yourself for more such stories to follow. As the vaccination story plays out, media attention is shifting to transparency and, even more broadly, healthcare consumerism and interoperability.

To comply, or not to comply … that was the question.

If you complied, that was a good start – but only a start. Going forward, you have to be prepared to answer questions related to your prices and cost of services, especially if yours are near the top of the list or highest in your market.

Some hospitals and providers intentionally decided to take the penalty. If that’s you, how long are you willing to pay that? And how much reputational damage are you risking if people can’t find information they want? And how will you explain why you chose that path?

Either way, we’re not looking at this just in terms of compliance for the sake of compliance. What about making it consumer friendly – and gaining a competitive advantage in doing so? The letter of the law is merely publishing your chargemaster. Going beyond means developing an online price estimator tool or other useful tools that improve the patient experience (think “access” and “engagement”).

Transparency and interoperability are not flavors of the month. We live in an increasingly consumer- centric world, and healthcare is finally having to catch up. The push is strengthening to give patients more transparency to the cost of services and access to their own health information.

Our advice?

Don’t delay the inevitable.

If you’re compliant, start working with your clinical, marcom, operations and patient experience teams to plan how you’ll use the box-checking of the rule to launch you into a more patient-centric model over time. Review your technology, financial tools and more. And while you’re doing it, ask around – see what your patients want and need to make their experience even better.

If you’ve chosen the route of noncompliance, here are seven things you can do right now to prepare for what’s to come:

Healthcare is a highly trusted industry. A recent Jarrard Inc. survey showed that doctors, nurses and hospitals all enjoy well over 80 percent trust among the public. Consumers trust doctors more than their insurance company for accurate information on the price of healthcare services, and they’re more likely to call their doctor’s office than their insurance company for that information. Patients want to hear from you.

Beyond that, we know that information related to cost of services is important to consumers. According to our survey, two-thirds reported that the cost of healthcare services impacts where they choose to receive care. Meanwhile, almost four in ten consumers have used a price estimator in the last 12 months.

Here’s the bottom line: Now is a great time to leverage the trust patients and consumers have in providers. It’s an opportunity to connect with patients beyond a single visit or course of treatment. They’re looking for safety, security and transparency. Be the organization that provides it. You have everything to gain.

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In High Stakes, J|Insights, Strategic Positioning

Healthcare Consolidation in the Spotlight

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Today we’re catching up on healthcare mergers, acquisitions and partnerships with CEO David Jarrard and Isaac Squyres, a partner in our regional practice and leader of our M&A team. What does consolidation look like post-COVID-19 and under the Biden administration? David and Isaac are watching this issue closely, as is our network of brokers, transaction attorneys and strategy experts across the country. We recently surveyed that network to get a sense of the trends to expect in 2021, and the short version is that even as there will be a lot of legal and regulatory wrangling, it’s more important than ever to have a clear purpose and a clear story to tell about the value of care that hospitals provide and why a transaction is the right thing to do. Scale for the sake of scale won’t cut it.

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In High Stakes, M&A, Strategic Positioning

Healthcare M&A Predictions, Take Two: Under Biden & Post-COVID-19

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Last July just as the world was about to reopen and fallout from months of lost revenue was about to descend, we polled our extensive network to see what the future held for hospital mergers and acquisitions.

Who would be buying? Who would be selling? How would a previously active M&A landscape change in light of the pandemic? And might the looming election shift power from one side of the aisle to the other, leading to significant regulatory or legislative changes?

You can see what our experts said then.

So, what do they say now?

Glad you asked. Because we did too.

We checked back with several of our prognosticators, along with a few other players in the legal, financial, strategic planning and management consulting sectors, asking them four questions:

As before, we’ve condensed the answers into a few themes, but the full verbatim can be found below the summary.

Asked if the rate of transactions will begin to climb, a slight plurality predicted the pace and volume of transactions will remain at current levels throughout 2021. The rest said they expect to see the pace of transactions ramp up in Q2 or Q3.

Why did our experts pick the timeline they did?

The consensus was that operational hurdles created by the pandemic have subsided or will soon subside, and that atypical events like the distribution of Cares Act relief funds didn’t change “underlying economic pressures.” Moreover, they noted that the endgame to the pandemic seems to be taking shape, as does a path to economic recovery.

As a return to some “normalcy” occurs, it will become apparent who has emerged stronger, who is weaker and which organizations that were struggling and looking for a partner before the pandemic brought life screeching to a halt – might resume a courtship.

These factors and trends were common across the responses we received, with the differences generally being whether people thought they had resolved enough to have already pushed the pace of transactions to a plateau (“the pace we see today is the pace we’ll see this year) or if they’re still getting worked out (Q2/3).

When we asked about top considerations for buyers and sellers, our experts mentioned:

Buyers balancing resources: recovery vs acquisition
Sellers being flexible and setting realistic expectations
Need for care in the deal process to get through regulatory scrutiny
Buyers helping sellers address the state of their workforce
Need for alignment on strategy and purpose behind a deal (not just scale)

When it came to whether or not deals will be harder to do today, the consensus was “yes.” We heard a few common reasons why:

Federal Scrutiny

(Likely) HHS Secretary Xavier Becerra’s name and reputation came up repeatedly.

State/Local Scrutiny

Non-local control and the effect of consolidation on health equity and community good may be a concern.

Value Proposition

New economic realities and getting to underlying valuations may make deals harder.

Purpose

“Scale for the sake of scale” won’t work. Deals need to be strategic and close existing gaps in services/operations.

Transformation

There is a need to pursue deals that will advance technology and value-based care.

COVID-19’s Wake

Sorting out the underlying fundamentals from the noise of relief funds adds layers of complexity.

Whatever predictions do come true, the tone of the comments reveals something quietly significant and hopeful: There will be a renewed focus on non-COVID-19-related work. Providers are turning their attention to what comes next, signaling the pandemic’s last miles and the opening push for the new administration.

Take a look at the full comments below.

ArchGate Partners

Joe Cerreta

Partner

Barry Sagraves

Partner

Are deals going to be harder to do?

Transactions will be harder to complete, though for reasons beyond changing attitudes of federal regulators. While the new administration is likely to neutral to negative toward consolidation, the FTC will continue its historic opposition rather than ratchet it up. Most of the increased difficulty is completing transactions will be the result of a fundamental change in the economics of the hospital industry, with COVID-19 accelerating trends toward value based care and a risk based reimbursement model as well as increasing consumer preferences for outpatient settings and digital interaction. Systems looking to add members will face more uncertainty and risk in transactions. There will be more organizations seeking to join a system than systems seeking new members. Finally, state and local government may be more hostile to consolidation as concerns about health equity and the good of the community add to worries about non-local control.

What are key considerations for buyers and sellers?

Buyers

Buyers will have to effectively balance resources between trying to complete transactions while recovering from the pandemic and meeting the many changes in the industry. Promising appropriate consideration to successfully be selected as the partner of choice and then delivering the promised benefits will be key for overall system success.

Sellers

Those seeking to join a system will need to have realistic expectations. While many partner-seekers will be distressed, those with stronger financial and competitive positions may find fewer and/or less-aggressive suitors. It will be more important than ever that those considering joining a system utilize a flexible, appropriate approach to the market and not unintentionally chase away a high-quality partner with overly cumbersome RFPs, lengthy negotiations or excessive demands.

When will deals pick up?

Q3

Partnership activity (though not necessarily announced transactions) will pick up in the third quarter.  Visibility on vaccines and the course of the pandemic should be more clear, as well as the state of the economy. Buyers should be feeling more certainty and will need to address the underlying needs for growth and scale after a pandemic-induced hiatus.

Ascendient

Dawn Carter

Founder & Senior Partner

Are deals going to be harder to do?

I definitely believe that there will be heightened scrutiny from the Biden administration and the FTC. In addition, buyers will continue to be more discerning in deals they pursue, for their own strategic reasons, as well as to avoid lengthy, expensive efforts that are eventually blocked by the FTC.

What are key considerations for buyers and sellers?

Buyers

Clearly articulating the strategic purpose of the deal and understanding the value the target brings to the organization.

Sellers

Making sure the organization is as financially strong as possible before embarking on a process, as most buyers have very little interest in financially vulnerable organizations.

When will deals pick up?

The pace today is the pace we’ll see.

Things slowed a bit in 2020, particularly as health systems were trying to get their operational “sea legs” for COVID-19.  Despite the ongoing pandemic, those operational hurdles have been dealt with for the most part and there is a lot more normalcy around M&A transactions. The challenges to the pace will continue to be a) a lot of “low-hanging fruit” deals have been done, so those remaining are more difficult for a reason and/or are much larger deals, which then gets to #1 above; b) overall conservative, low-risk position of most buyers.

Bass, Berry & Sims PLC

Angela Humphreys

Chair, Healthcare Practice Group and Co-Chair, Healthcare Private Equity Team

Are deals going to be harder to do?

There certainly will be more considerations at play, including calibrating for a return to pre-COVID volumes, addressing government funding such as Provider Relief Funds, Medicare Advance Payments and PPP loans, and the potential for increased antitrust scrutiny under the Biden administration.  That said, with a bit of pent up demand, 2021 is poised for high deal flow, particularly for companies that have a view towards value based care and the implementation of technology solutions.

What are key considerations for buyers and sellers?

Buyers

Comfort around the long-term sustainability of the business post-COVID.

Sellers

Certainty of valuation.

When will deals pick up?

Q3

Smaller hospitals have been struggling in the wake of COVID-19 due, in part, to a downturn in elective procedures and thin financial reserves.  As a result, they will need to pursue strategic alliances and partnerships to survive. Separately, query whether this will be a year of the mega merger that brings together large competitors to capitalize on synergies from streamlined management and payor and vendor contracting strategies.

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Robert York

Director, Value-Based Care Practice Leader

R. Christopher Regan

Founding Partner, Managing Director

Are deals going to be harder to do?

Increasing regulatory scrutiny and industry impact due to COVID has refocused healthcare executives to increase overall partnership evaluation and diligence efforts. We don’t see deals happening just to make a deal. It is critical to ensure that future partnerships are sustainable and will deliver on the organization’s long-term strategic goals and objectives as well as satisfy any regulatory concerns.  The partnership process from evaluation to close consumes tremendous organizational bandwidth and so it is critical to make sure there is a clear and sustainable business case for a particular partnership upfront before investing significant time and effort.

What are key considerations for buyers and sellers?

Buyers

Healthcare leadership is re-evaluating overall organizational portfolios given the lessons learned from this past year and identifying capabilities and relationships they need to build out operationally, clinically and financially to stabilize and strengthen the organizational position into 2021.  No matter where you sit in the healthcare eco-system it is time to re-evaluate your organization’ position and needs based on the changed external and internal situation and go-forward outlook.

Sellers

Hospitals and health system partnerships have been focused on building up scale and reach for the sake of scale and reach. But, building scale for scale’s sake is no longer a sufficient case for partnership by itself and healthcare leadership is placing a greater focus on partnerships that can diverse revenue/risk profile and materially advance capabilities and close gaps in the current portfolio including physician, ambulatory and other non-hospital based businesses, virtual/ technology enabled care delivery and management and payor and health plan products.

When will deals pick up?

The pace today is the pace we’ll see.

Hospital deals started to pick back up in Q4 2020 and we see that continuing.  Broader healthcare M&A activity outside of hospitals including both virtual/ digital health plays and physician and ambulatory really remained strong and is continuing to do so.  We expect this resurgence of partnership activity to continue through 2021 as healthcare leadership attention shifts from crisis management to mid- to long-term strategy and sustainability; however, the range of options will look different from years past and continue to extend well beyond traditional hospital to hospital deals.

Juniper Advisory

Rex Burgdorfer

Managing Director

Are deals going to be harder to do?

Health care combinations won’t necessarily be harder to do, but partnership processes will likely need to be more robust to meet heightened regulatory scrutiny. The leadership of Vice President Harris and HHS Secretary nominee Becerra may influence policy at the FTC and DOJ. It is also worth noting that State Attorneys General are also playing a more active role in reviewing hospital transactions. 

COVID has, and will continue to, drive transformation in health care. The experience of a global pandemic has accelerated the rate of change in the industry dramatically. As a result, hospitals and health systems are increasingly looking for new ways to work together to serve their communities and ensure their ongoing vitality. There are a few trends we expect to see more of in 2021: 1) number of transactions between large $1+B health systems across geographic boundaries, 2) partnerships between providers and payors and 3) unique structures that bring two health systems very close together operationally but stop short of change of control. 

What are key considerations for buyers and sellers?

There has been a growing focus on regulatory review in M&A transactions.  As the market for corporate control in the hospital industry matures, data like the American Bar Association “Deal Point Study” are settling in on what constitutes ‘market’ value, terms, and conditions.  The wildcard, however, which always seems to arise in the final negotiations of a definitive agreement, is the risk exchange surrounding various government programs and oversight.

For both buyers and sellers, speed and moving partnership processes forward continues to be a main objective. The benefits of partnership and scale have never been more important than during the pandemic response. The sooner hospitals can affiliate, the sooner their institution and their community will see the positive impact.  However, for buyers of distressed hospitals, we are seeing prolonged periods of due diligence as they evaluate their financial positions and risk. 

When will deals pick up?

Q3

Systems that we work have a pent-up demand for forming regional partnerships.  COVID proved to be a significant disruption to hospital operations and strategic plans. The federal Cares Act relief funding was helpful but has not changed the underlying economic pressures causing management teams to believe that better coordination across the sector is needed to improve the efficiency and quality of care.  Once vaccinations are more widespread, and long-term strategic initiatives dusted-off, I think we’ll see a return to ~100 transaction per year.

Are deals going to be harder to do?

The effect of the Biden Administration on transactions is uncertain, but the guess is that we will see a more active FTC going forward.  But I don’t believe that the regulatory environment and any changes implemented under the Biden Administration will be a material impediment to closing deals.  The challenges are going to be around valuation expectations for both buyers and sellers given the last 12 months of operations for hospitals were so impacted by COVID.   An additional uncertainty that will influence the valuation discuss will be any progress on expanding the coverage of the Medicare program.

What are key considerations for buyers and sellers?

Buyers

Buyers will need to evaluate the state of the workforce at a target facility to understand the potential and the length of time for employees to return to “business as usual.”

Sellers

Sellers will want to assess what a Buyer brings to the table that might help the same workforce fatigue issue.

When will deals pick up?

Q2

My prediction is that we will see the pace of hospital transactions increase in Q2, assuming that the recent positive trend in COVID-19 cases continues and more of the population is vaccinated.  Hospital leaders will be able to see the light at the end of the tunnel and turn back to strategic planning.  Also, there will be a number of hospitals/systems that will need to take strategic steps having been financially weakened over the last year.

Are deals going to be harder to do?

Yes, the historic trend of the mega-merger will be under a microscope by the Biden Administration. The Biden Administration has made it clear that it will intensify its review of healthcare mergers and acquisitions and the expectation is that there will be longer periods for review and greater likelihood of second requests by the FTC. In addition, State Attorneys General have become much more aggressive in their review of potential combinations, resulting in increased involvement in the terms of the agreement, particularly focusing on the covenants of purchasers post-closing, including provision of indigent care, limitations on rate increases and attention to social determinants of health. As a result of these factors, Buyers will have to take into account the increased time delays, expenses, potential divestiture of assets and increased commitments to the community in connection with such transactions. That being said, although it is anticipated that Secretary Becerra may indirectly and discreetly play a role in the policies connected with healthcare merger and acquisition review, we anticipate that Becerra’s strong support of the ACA will be a counterbalancing factor, along with continued relaxation of regulations and issuance of waivers at least for the remainder of COVID-19. In addition, buyers have the burden of scoping and quantifying the potential COVID-19 liabilities and the complications to a transaction as buyers try to understand what stimulus funds were received and the restrictions regarding use of the funds and the potential requirement to repay such funds. Finally, there is just the simple fact that healthcare mergers and acquisitions have become increasingly complex, time consuming and expensive. For all of the aforementioned reasons, it will be imperative for the parties to have a clear and strong strategic basis for the transaction, and go in in with eyes wide open to the challenges.

What are key considerations for buyers and sellers?

Buyers

From the perspective of a buyer, it is important to identify the key strategic goals of the transaction and create clear and consistent communication regarding how the transaction will satisfy those goals both within executive leadership and ultimately to the board. Increasingly, we are seeing that if the board is not tracking closely with the executive leadership team in the process, then there is more opportunity for the deal to not advance forward.

Sellers

As has historically been the case, certainty of close is imperative for sellers. As a result, I think that it is important for sellers to proactively take as many issues as possible off the table by being proactive in terms of diligence, transparency in terms of identification and resolution of issues so that the parties can minimize the closing conditions.

When will deals pick up?

Q2

There is significant capital that has been sitting on the sidelines for the better of part of 2020 that is waiting to be deployed.  Now that we have the (i) certainty of the election results, (ii) declines in COVID-19 cases, (iii) positive vaccine projections and (iv) boards and management teams more able to focus on strategic growth, hospitals and health system deal activity is picking up.  We are seeing an increase in activity in the letter of intent/definitive agreement stage already that should lead to deals closing Q2 of 2021.  In addition, we have seen a significant uptick in the hospitals and health systems focused on strategic service lines and vertical integration.  We also anticipate that the regional consolidations will continue to trend in 2021 as they have for the past few years.

Are deals going to be harder to do?

Deals have been difficult to do for a while and it does not seem that will be getting any easier, whether that is due to state Attorney General enforcement, lower HSR filing thresholds and FTC interest, or more discerning financial, operational, cultural and legal due diligence by parties. Having said that, while timelines may get drawn out and deal terms may get modified to accommodate stakeholders and regulators, deals will still close.

What are key considerations for buyers and sellers?

Buyers

Since many hospital M&A transactions are effectuated through “membership substitutions”, one consideration for buyers in such structures is what post-closing operational covenants buyers are willing to commit to the “seller” (and, in effect, the communities served by the seller’s facilities). In prior years, many buyers were willing to commit to continue to operate the facilities, service lines and programs “as is” for a number of years, as well as committing to spend significant funds on capital commitments, IT integration or other meaningful projects at the seller facilities, and those are increasingly difficult commitments for buyers to make.

Sellers

On the flip side of a buyer’s consideration regarding making significant, long-term post-closing commitments, sellers need to consider, in the absence or reduction of such commitments, what is appropriate transaction consideration to “hand over the keys” and still obtain necessary approvals from their board, stakeholders or regulators. As hospitals move away from a focus on bricks and mortar development, and invest in telehealth, value based-care arrangements and innovative care delivery models, sellers will need to consider whether preservation of existing operations is appropriate.

When will deals pick up?

The pace today is the pace we’ll see.

The pace for 2021 is already very active, and such pace is likely to continue throughout the year, as C-suites and boards of hospitals looking to engage in discussions with potential buyers are now more able to commit the necessary time and attention to strategic initiatives. Buyers are also willing to engage in such discussions and are anxious to execute on opportunities that may not have presented themselves but for COVID-19.  In addition to “traditional” M&A, parties are actively discussing alternative transaction structures, including joint operating agreements, joint ventures, clinical collaboration arrangements, adding to the already energetic pace of transactional activity thus far in 2021.

Ponder & Co

Eb LeMaster

Managing Director

Are deals going to be harder to do?

In the context of regulatory scrutiny, there are several compelling reasons for why deals may become more difficult to consummate. As a long tenured member of the California Assembly, a House Representative and California Attorney General, Xavier Becerra, has a strong track record for aggressive antitrust oversight, including his opposition of the proposed deal between Adventist Health and St. Joseph Health and adding stringent conditions to the Cedars-Sinai Medical Center merger with Huntington Memorial Hospital. Moreover, spurred by the challenges of the pandemic in an already challenging operating environment, we expect the stakes of regulatory intervention to continue to rise as providers seek in-market or adjacent-market acquisitions. Notable deals that received FTC intervention, or are under regulatory review, include Prisma’s acquisition of three LifePoint hospitals in South Carolina and Methodist Le Bonheur’s attempted acquisition of Tenet’s Memphis assets. As providers continue to evaluate their strategic options and expand out from regional hubs or divest non-core assets to in-region competitors, we expect this trend of increasing regulatory scrutiny to continue. Consequently, to help mitigate protracted deal processes due to regulatory intervention and significant legal expense, we are already seeing buyers, more intentional on the front end of due diligence, proactively engage anti-trust counsels and economic advisors, to assess the merits of a deal from a regulatory perspective.

What are key considerations for buyers and sellers?

Assessing the likely breadth and intensity of buyer interest prior to marketing is more important than ever during the pandemic. In some cases, buyers are focusing almost exclusively on pre-pandemic financial/operating trends and results while in other cases, they are factoring in the impact of the pandemic, adjusting run rate cash flow downward and adjusting target results for governmental financial support. New Hanover Regional Medical Center, for example, was able to hold the line on its $1.5 billion pre-pandemic valuation from Novant Health, certainly benefitting from the significant interest from a range of for-profit and not-for-profit partners in the event terms changed. Other sellers with less interest from the market have not been so fortunate as transactions have been repriced or commitments changed. Ultimately, this is as much an art as it is a science, and the outcome is heavily dependent on the breadth and depth of partner interest.

When will deals pick up?

The pace today is the pace we’ll see.

We expect the average quarterly volume in 2021 to be similar to the levels of 2020. On the one hand, Q4 2020 announced volume was strong with 28 announced transactions, the highest single quarterly total since Q1 of 2018. Also, there is a healthy backlog of more than a dozen systems in partnership discussions and under LOIs towards affiliation from the latter part of 2020. However, the pandemic will continue to hold down transaction volumes as healthcare systems and hospitals have been given short-term breathing room through pandemic government support payments and as volumes continue to ramp up ahead of original expectations despite the continued pandemic. Many health systems are using this time to recalibrate financial projections for the remainder of 2021 and continue to study strategic options. Also, the top driver of consolidation–significant negative governmental reimbursement change—is highly unlikely in the near-term in light of the pandemic and related pressures on health systems.

Are deals going to be harder to do?

Historically, Democratic administrations have applied more regulation to transactions. So, we believe we can expect that there will be more scrutiny particularly of larger transactions. Xavier Becerra and Kamala Harris were very engaged in looking at anti-competitive behavior when they were in the Attorney General’s office in California, so it would not surprise me if larger transactions got additional scrutiny from the FTC. For example, this article cites Becerra’s antitrust litigation against Sutter Health.

What are key considerations for buyers and sellers?

Buyers

Buyers need to consider and make sure that the grants and loans provided to facilities in 2020 are not masking systemic financial issues and considering the impact repayment of those amounts may have on the cash flow of the hospitals. Using CHS as an example, the government appears willing to spread repayments out over quite a long period of time.

Sellers

Sellers will need to move quickly. Transactions that take 9-12 months are more costly and increase the likelihood the deal won’t get done. It also weighs on your employees and could lead to attrition. Sometimes you can’t avoid it, getting AG approvals and the like, but if you can, getting a deal closed quickly will save everyone money and make for a happier workforce.

When will deals pick up?

Q2

I think second quarter due to more vaccinations, more return to normalcy, and more pent-up demand. 2020 was a surprising year for M&A activity, but I remain bullish on transactions. I think the pandemic has strengthened some systems and weakened others which is a natural setting for more M&A transactions.

Historically, Democratic administrations have applied more regulation to transactions. So, we believe we can expect that there will be more scrutiny particularly of larger transactions. Xavier Becerra and Kamala Harris were very engaged in looking at anti-competitive behavior when they were in the Attorney General’s office in California, so it would not surprise me if larger transactions got additional scrutiny from the FTC. For example, this article cites Becerra’s antitrust litigation against Sutter Health.

Buyers

Buyers need to consider and make sure that the grants and loans provided to facilities in 2020 are not masking systemic financial issues and considering the impact repayment of those amounts may have on the cash flow of the hospitals. Using CHS as an example, the government appears willing to spread repayments out over quite a long period of time.

Sellers

Sellers will need to move quickly. Transactions that take 9-12 months are more costly and increase the likelihood the deal won’t get done. It also weighs on your employees and could lead to attrition. Sometimes you can’t avoid it, getting AG approvals and the like, but if you can, getting a deal closed quickly will save everyone money and make for a happier workforce.

Q2

I think second quarter due to more vaccinations, more return to normalcy, and more pent-up demand. 2020 was a surprising year for M&A activity, but I remain bullish on transactions. I think the pandemic has strengthened some systems and weakened others which is a natural setting for more M&A transactions.

In Change Management, High Stakes

Psychology, Communications and Vaccine Hesitancy

Woman lifting her shirt sleeve while a man inserts a medical shot into her arm

We fear things that can help us. Why? And, maybe more importantly, how do we overcome that fear?

A couple of weeks ago, we ran a conversation between Molly Cate, founding partner and chief innovation officer at Jarrard, Dr. Mark Wenneker, a partner at The Chartis Group and primary care internist who leads Chartis’ behavioral health practice, and Dr. Danny Mendoza, a psychiatrist with the Beth Israel Lahey Health System and an expert in behavioral health integration. In that conversation, we looked at some clinical principles healthcare leaders can apply to their teams, patients, and the public to allay fear in this bizarre pandemic world we’ve been living in.

It was all rooted in a white paper that we published along the same lines. You can find that white paper at jarrardinc.com. But as we went through that first conversation, and as things continued moving forward in the vaccine rollout, it became clear that the principles applied to vaccine hesitancy as well. There’s a whole second discussion to be had with Wenneker and Mendoza about some of the psychology behind hesitancy and how healthcare providers can sort of guide people rather than push them. This is that conversation.

In Firm News, High Stakes

Support for Healthcare Workforce Mission Critical for Provider Organizations to Avoid Brain Drain

Two Executive Summary Magazines, one laying on the other, with text that reads "Coronavirus: The One-Year Mark" and an orange bar graph

National survey reveals 15 percent of healthcare workers unlikely to remain in the field following pandemic. 

BRENTWOOD, Tenn., and Chicago – The healthcare workforce is in desperate need of attention, according to a new consumer survey released today. 

The study, third in a series from healthcare strategic communications firm Jarrard Phillips Cate & Hancock and Public Opinion Strategies, revealed that as many as one in seven healthcare workers could exit the field following the pandemic, potentially leaving a significant staffing shortage at provider organizations. Age is a factor, with 23 percent of younger healthcare workers (aged 18-34) not likely to remain, compared to only nine percent of those in the 35-64 bracket, according to the January 2021 survey. 

“With no people, it’s mission impossible for healthcare,” said David Jarrard, CEO of Jarrard Inc. “An exodus from this essential industry is a real concern, coming on the heels of caregiver burnout that was raging prior to the pandemic.” 

“That’s why listening to and engaging with physicians and employees enterprise-wide is imperative for healthcare leaders today so they can make adjustments necessary to support and retain their cherished staff.” 

Yet on a positive note, healthcare workers are more willing to be vaccinated than they were last summer: Vaccine hesitancy among healthcare workers and their families has dropped six points since August. Of those who are living in healthcare households and skeptical of COVID-19 vaccines, concern about potential side effects is the biggest barrier to acceptance. That issue can be ameliorated over time as these individuals witness positive outcomes for others who have been vaccinated. 

The survey indicated that public trust in and support of healthcare providers remains high. The public wants to hear from doctors, nurses and hospitals on key healthcare issues, including COVID-19 vaccines. 

Together, the findings suggest that provider organizations are in a moment where workforce support will be critical to weathering ongoing pandemic-driven challenges – and to helping to educate and guide the public toward vaccine acceptance. 

“As we have seen throughout the pandemic, the public trusts healthcare workers and supports hospitals, wanting to hear from these groups on key issues,” Jarrard said. “However, it will be difficult to 

use this trust to promote vaccine acceptance and other health initiatives if those same caregivers are skeptical and burned out.” 

Other key findings revealed by the online survey of 1,002 American adults (credibility interval 3.53 percent), fielded January 12-16, 2021 when vaccination rollouts were well underway, include: 

  • Fear of the virus continues its dominance of American life in 2021: More than one-third of Americans view the pandemic as the most important issue facing the country, and 76 percent remain concerned they or a loved one will contract it. However, Americans feel safer in medical settings than many other public spaces. 
  • The public remains skeptical of vaccines: Barely half say they are highly likely to get vaccinated, with resistance strongest in key groups including women and minorities. Fear of side effects is the most often cited concern, particularly among those communities, underscoring the need for providers to be active vaccine educators. 
  • Providers are trusted and have a mandate to use their voice: Doctors, nurses and hospitals remain the most trusted professionals and institutions in the country and have generally escaped blame for problems in the vaccine rollout. In this moment, people want to hear from providers above all others on healthcare issues, especially about the safety and effectiveness of vaccines. 
  • Healthcare workers are at their breaking point: Forty percent of healthcare workers are unlikely or only somewhat likely to remain in the field after living through the pandemic. Since August, concern about side effects has jumped 25 points among healthcare workers skeptical of the vaccine. In contrast, the vast majority of consumers think hospitals should require their staffs to be vaccinated. 
  • Providers have bright spots to leverage: Telehealth use has grown and is well-liked, with 53 percent of respondents saying they had used telehealth (up from 29 percent last April) and three-quarters of those saying they will continue to use it in the future. Meanwhile, virtually everyone feels that price transparency is important and valuable in their pursuit of care. They continue to think hospitals should receive more funding from the federal government. But most important: Respondents feel safer in medical settings and are more likely to return to care sooner than they were in August. 

“The past 12 months have put a spotlight on the work of our healthcare workers, along with hospitals, health systems and so many other provider organizations,” Jarrard said. 

“Though challenges remain, now is a critical moment for these organizations to step back and look at ways to maintain the trust they have earned, create or consolidate programs to improve access and outcomes, and fulfill their mission as we move out of the pandemic. That means continuing to educate about vaccines, but also looking to longer-term partnerships and programs like telehealth, price transparency and even hospital-at-home.” 

About Jarrard Inc. 

With offices in Nashville, Tenn. and Chicago, Jarrard Phillips Cate & Hancock, Inc. is a U.S. top 10 strategic communications consulting firm for the nation’s leading healthcare providers experiencing significant change, challenge or opportunity. Founded in 2006, the firm has worked with more than 500 clients in 45 states. Jarrard Inc. specializes in M&A, change management, issue navigation and strategic positioning, and has recently worked with more than 60 healthcare organizations on communications initiatives revolving around the coronavirus pandemic. Jarrard Inc. is a division of The Chartis Group. 

For more information, visit jarrardinc.com or follow us @JarrardInc. 

In Change Management, High Stakes, Kaleidoscope

Vaccine Case Study: Understanding and Encouraging the Reluctant

Aerial view of a city

The pandemic has rocked California. And Cedars-Sinai provides care for over a million people annually across 40 locations in the incredibly diverse Los Angeles area.

Today, as vaccine distribution is underway, Cedars-Sinai is faced with a common challenge: how to encourage vaccination among Black and Latino communities.

We asked Dorian Harriston, associate director of brand strategy, to explain how Cedars-Sinai is tackling this challenge. The answer lies in the organization’s longstanding commitment to community partnerships.

photo courtesy of Cedars-Sinai

Jarrard Inc: The issue of vaccine hesitancy among the Black community is well-documented and something many providers are struggling with right now. What does it look like in Los Angeles?

Dorian Harriston: Vaccine hesitancy appears to be as prevalent here as anywhere else – especially in Black and brown communities.

From my experience, the level of education, income or job doesn’t factor into whether an individual is hesitant to get the vaccine. It’s a deeply rooted effect of historical medical mistreatment that has caused distrust. I hear the same things from family and friends as I do on social media and even colleagues in healthcare: People are afraid, and the conspiracy theories and misconstrued testimonies posted online are not helping. This is a serious issue.

How is Cedars-Sinai addressing the hesitancy?

We’ve prepared an overall strategy to strengthen our relationship with these communities. It starts by partnering with organizations that cater to the needs of Black and brown communities. We hope to be a true partner, amplifying their messages and providing support – and not just monetary support – to increase and sustain resources while conducting outreach to show commitment to our community.

What does that strategy look like in practice?

Initially, we’re doing a series of virtual talks and engaging faith, community and healthcare partners to discuss the issue in various formats. We’re enabling our clinicians and researchers to answer FAQs and attempt to ease fears by responding with facts.

We have to be honest about barriers that cause hesitancy to address them and help determine culturally relevant and satisfactory solutions. Transparency, honesty and commitment are paramount to changing longstanding thoughts and behaviors. We need to regain the Black community’s trust, and we must prepare for a long-term commitment.

Talk more about the role of your team members.

It’s essential that we take as much care internally as we do externally. We’re creating internal conversations around vaccine hesitancy and trust, taking the time to tackle this initiative collectively because it affects all aspects of the programs and services we provide as an institution. Employees must be ambassadors that carry factual and positive messages to their circles of influence. It will take a village to make headway.

How is it going?

We’re just getting started. The first step is to find out what Black and brown communities want and need. We’re doing this through our partners and stakeholders. Partnership is the key to expanding outreach and ensuring the message is reaching every audience within these communities. We need to communicate with influencers – whether that’s the internal family circle (caretakers responsible for multi-generational households, children that bring new information and technology, etc.) or external relationships (faith leaders, clinicians, community and civic leaders and friends). Organizations have provided what they believe this demographic needs for far too long without doing the research to back it up. We want to be sure we are addressing needs in a way that helps build trust and establish a consistent path to preventive care.

Healthcare is local. How do you, as a large system with a significant geographic footprint and diverse patient population, present messages that will resonate with each community while remaining consistent across the system?

The pandemic has forced our team to review our current practices for efficiency and align messages across channels. I see us working together more as a team due to COVID-19 than before the pandemic. Although we have a lot more meetings, being able to divide and conquer and form special project teams has allowed us to refine our messaging and reach a larger audience while promoting significant but often overlooked areas – in particular, research, education, and community engagement. These areas create a trifecta with clinical care vital to defining needs, breaking down barriers to vaccine acceptance, and promoting health equity. We also want to ensure that Black faculty and staff are included and visible so that these communities know there are people who look like them working on their behalf.

What advice do you have for other providers? Are there best practices that that apply across the board?

  1. It’s important to align strategy around your organization’s health equity and diversity and inclusion goals. Creating tactics is easy, but it’s essential to have a definitive strategy that speaks to who the organization is and provides a roadmap to inclusively provide for your community’s health.
  2. Ensure that your communication is honest and transparent. There’s no shame in admitting you don’t have a piece of information or don’t know something. Also, remember that one message may not be sufficient. There are varied audiences within each targeted demographic, and having a single message isn’t enough. Having multiple messages and communications vehicles could be the difference between being heard or ignored.
  3. Before beginning any outreach, know that there are no quick fixes. If your organization isn’t willing to invest budget, time and resources, don’t proceed. To battle the distrust and inequity that Black and brown communities have experienced, you must consistently engage and work to understand unique needs, health disparities and cultural norms. Have BIPOC (Black, Indigenous and people of color) on your team or as advisors to vet advertising and messaging and provide communication vehicles such as unique media outlets and preferred ways in which the target demographic seeks and digests information. One wrong message or misstep could injure an already fragile relationship with communities of color.
  4. When crafting a call to action, ensure you have the capacity and resources to engage and execute in a manner that will make it easier on your audience. Right now, individuals are afraid, anxious, angry and burned out. Anything that appears to be unclear or complicated will cause frustration, dismissal and possibly a negative perception of your organization. Ensure that your strategy allows for flexibility and resources that will help everyone within the community – even if you cannot provide those services.
In COVID-19, High Stakes, Issue Navigation

This Isn’t a Church Potluck

Group of people socializing and scooping food onto their plates at an outdoor gathering

Sometimes the title of a podcast picks itself. Today, our two favorite outspoken insiders, Kim Fox, and Tim Stewart, take on the vaccine rollout. It’s been rocky, and there’s plenty of blame to go around, but there’s still time for hospitals, health systems and other healthcare providers to swerve around the potholes.

Be sure to listen and subscribe to the podcast on Apple Podcasts or Spotify.

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