Healthcare consulting continued its turbulent consolidation streak last week and brought a big payout to the two founders of an East Coast-based turnaround firm who are former hospital administrators.
Huron Consulting Group last week paid $17 million -- $14 million in cash and $3 million in promissory notes -- to acquire consulting firm Speltz & Weis with an additional amount to be paid if certain performance targets are met. Speltz & Weis, which is incorporated in New Hampshire, was formed four years ago when its founders, David Speltz and Timothy Weis, came together to lead Syracuse, N.Y.'s Crouse Hospital out of bankruptcy, Speltz said.
The deal includes a team of approximately 30 consultants from Speltz & Weis, Huron officials said, and brings an interim and crisis-management group to Chicago-based Huron's fledgling healthcare practice.
The acquisition is the latest move in a game of musical chairs that seems to have enveloped the healthcare consulting business over the past few years, apparently fueled by a business boom for healthcare consultants. Huron, which was formed in May 2002 and went public in October 2004, launched its healthcare provider consulting service in 2003 when it recruited four senior consultants from the former Cap Gemini Ernst & Young at a time of turmoil at the Paris-based firm (Sept. 29, 2003, p. 33). Three of the consultants have since left Huron, most recently turnaround expert James Pizzo, who returned to Capgemini (Jan. 24, p. 32).
In a conference call last month, Huron Chairman and Chief Executive Officer Gary Holdren referred to the company's reasons for beefing up its healthcare sector, noting that healthcare represents 15% of the nation's gross domestic product. "I think most of us will agree the healthcare system in the United States has major challenges," he said. "The consulting dollars spent in this industry are in the billions. The changes over the next several years in the healthcare sector will create great opportunities for Huron."
In still more upheaval at Capgemini, consulting firm Accenture recently agreed to purchase Capgemini's North American healthcare practice for $175 million in cash -- one of two other consolidation deals among healthcare consultants announced last month (April 25, p. 22). Navigant Consulting bought Tiber Group for $8.4 million -- its fourth healthcare consulting acquisition since 2002.
The activity is occurring all across the country at big and small consulting firms, which are "extraordinarily busy" after several years of quiet, said Jerry Katz, president of Katz Consulting Group. "If consultants are not busy now, they never will be," he said.
Speltz said he has "absolutely no" plans to take the cash and retire, but will remain with Huron to lead the healthcare practice's interim management group. He acknowledged that there "seems to be a lot of consolidation going on" in the healthcare consulting arena, but for his firm, "it's a natural progression to ensure quality and depth," he said.
Among other clients, Speltz & Weis has managed the financially troubled St. Vincent Catholic Medical Centers in New York since January 2004, with Speltz serving as president and CEO and Weis as chief financial officer.
The deal will have no negative impact on the firm's relationship with St. Vincent and offers "the added benefit of being able to access the significant resources and expertise of Huron," St. Vincent Board Chairman Richard Boyle said in a written statement. The leadership "is pleased with the progress of the system's turnaround and the achievements made to date," he said.
In April the contract with St. Vincent was extended until October when it will be reviewed again by the board, Speltz said. In addition, Speltz, who is on the board of the Greater New York Hospital Association, was elected to its executive committee last month.