Not-for-profit AdventHealth plans to buy a 25% stake in a smaller health system in its home state of Florida.
Altamonte Springs, Fla.-based AdventHealth, which operates in almost a dozen states with more than half of its 52 hospitals Florida, aims to create a "super-regional" system of care with Health First, the systems announced this week. The two systems have operated health plans together since 2013.
The systems say the deal, which still needs approval from state and federal regulators, will allow Health First, which operates four hospitals in Brevard County, to stay independent in name and brand while still having access to more advanced tools and technologies. The news release said the deal could eventually include other strategic initiatives that are still in the works. AdventHealth has appointed two representatives to serve on Health First's board. In addition, Health First CEO Steve Johnson will serve on AdventHealth's board.
The two systems kicked off their partnership when they launched a health plan together, Johnson said in a statement. The systems offer Medicare, individual and commercial plans throughout their shared region.
"Both of our organizations are dedicated to serving the wellness and health needs of our communities—in an environment that heavily emphasizes integrity, ethics and the highest-quality, most compassionate care possible," he said.
Given how challenging growing topline revenue can be in markets with aging populations, it's no surprise health systems are trying to grow revenue outside of patient care, said Rich Bajner, a managing director with the consultancy Navigant. In this case, AdventHealth probably anticipates having insurance products in its local markets and, thus, covered lives, which will bring in more revenue, he said.
"What that indicates to us is there are a lot of providers out there that do feel like they have capabilities to be successful with their care management platforms, with the investments in data analytics with their electronic medical records," Bajner said, "and more are willing to test the water in these alternative contracts or buying into health plans."
Daryl Tol, CEO of AdventHealth's Central Florida division, said in a statement that the two systems are a natural fit.
"By partnering to create this new super region, we are able to expand our services and delivery a connected experience for our consumers, one that now stretches from the Gulf Coast to the Space Coast," he said.
While much smaller than AdventHealth, Health First appears to be on solid financial footing. Health First drew $54.6 million in operating income on $1.7 billion in revenue in its fiscal 2018, which ended Sept. 30, compared with $53 million in operating income on $1.5 billion in revenue in fiscal 2017. Its $74.3 million in excess revenue over expenses in fiscal 2018 barely edged out its $74 million in the prior year. Cash from operations jumped 47% year-over-year, rounding out fiscal 2018 at nearly $126 million.
Advent Health, which has 52 hospitals, including 30 in Florida, is also performing well. It drew $784.3 million in operating income on nearly $11 billion in revenue in calendar 2018. That's compared with $732.8 million in operating income on $10 billion in revenue in calendar 2017. The system drew $618 million in revenue over expenses in 2018, down 45% from $1.1 billion in 2017.
In January, the system switched to AdventHealth from its old name, Adventist Health System, as part of a broad brand transformation.