Becker's ASC Review

53 HEALTHCARE NEWS 53 Private equity healthcare bankruptcies are on the rise: 8 things to know By Alan Condon H ealthcare bankruptcies spiked in 2023 amid high debt levels and rising interest rates, with private equity firms owning 17 out of the 80 (21%) companies that filed for bankruptcy last year, according to a report published April 17 by the Private Equity Stakeholder Project. Eight things to know: 1. Air Methods, a helicopter ambulance business, and physician staffing companies Envision Healthcare and American Physician Partners were among the most high- profile private equity-owned healthcare companies to file for bankruptcy last year. 2. e number of private equity healthcare bankruptcies has increased significantly in recent years. In 2019, there were eight private equity healthcare bankruptcies, marking a 112.5% increase over the last five years. 3. About 460 U.S. hospitals are owned by private equity firms. at represents 8% of all private hospitals and 22% of all proprietary for-profit hospitals, according to PESP. At least 26% of private equity-owned hospitals serve rural populations. 4. Private equity's reliance on debt and aggressive financial strategies are highlighted as factors for the surge in healthcare bankruptcies last year, according to the report. 5. Rising interest rates, high labor costs and regulatory shis also compound the challenges faced by healthcare companies — particularly those burdened with high levels of debt under private equity ownership. 6. Healthcare company bankruptcies like these threaten to disrupt critical healthcare services, burden providers and strain publicly-funded healthcare infrastructure, including Medicare and Medicaid programs. 7. Most financially distressed healthcare companies are currently owned by private equity firms, which presents risks to the healthcare industry and infrastructure, according to the report. Researchers expect another wave of private equity-driven healthcare distress, restructuring and bankruptcies this year, intensifying concerns for the stability of essential healthcare resources. 8. In February, Miami-based Cano Health, a value-based primary care provider, filed for Chapter 11 bankruptcy. InTandem Capital Partners, Cano's private equity minority investor and previous owner, loaded it with $655 million in debt before the company went public. Cano laid off about 700 workers in 2023 and aims to emerge from the restructuring process in the second quarter of this year. n What Sutter's CEO did to cut employee turnover 30% in one year By Laura Dyrda W arner Thomas, president and CEO of Sutter Health, sees building a great culture as the health system CEO's most important job. "While a solid strategy is essential to business success, it's not enough," Mr. Thomas wrote in a LinkedIn post. "If leaders don't also invest their attention and resources into cultivating a thriving culture built on clarity, alignment and trust, even the most brilliant organizational strategy will falter." Mr. Thomas became CEO of Sutter Health in 2023 after spending years at the helm of Ochsner Health in New Orleans. He spoke about the importance of culture at the American College of Healthcare Executives in late March, noting that culture must continue to change with the organization. "Culture is an organization's most valuable asset, but it doesn't just evolve, and it shouldn't be left for employees to build themselves," he wrote. "As leaders, we must nurture and shape our organizational culture as thoughtfully as we develop our strategy." To build a great culture, Mr. Thomas said health systems need: 1. An engaged board of directors setting the tone. 2. CEO and executive leaders driving the culture 3. Departmental and division leaders owning the culture within their accountabilities 4. Clear goals and metrics to clarify team priorities 5. Regular huddles, team meetings and operating reviews as well as quarterly strategy sessions and an annual team retreat. Over the last year, Mr. Thomas and his leadership team have spent considerable time establishing a shared purpose systemwide, creating the clear strategic framework for long and short term goals, and aligning the team around a single incentive plan, he wrote. He has also worked to deepen connections with physicians and medical groups, and integrate organizational structure. Finally, Mr. Thomas shared in the last hear his team "changed organizational mindset to growth and focus on opportunities." Those efforts led to 31% improvement in employee, clinician and physician engagement scores, and 30% reduction in turnover. n

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