City of Hope, a prominent not-for-profit cancer researcher and treatment provider, said Wednesday it plans to buy Cancer Treatment Centers of America.
The deal, expected to close early next year pending regulatory approval, would create a large network of inpatient and outpatient oncology care that would serve an estimated 115,000 patients annually. The definitive agreement holds that Duarte, California-based City of Hope would pay $390 million for CTCA, based in Boca Raton, Florida.
"In Cancer Treatment Centers of America, we found an organization that shares with us that nonnegotiable value of putting patients first, the urgency of eliminating cancer and the commitment to delivering high-quality care," City of Hope CEO Robert Stone said in an interview.
The transaction would unite two cancer specialists with decidedly different backgrounds. City of Hope is among 71 National Cancer Institute-designed cancer centers in the country. It's a distinction the federal agency grants to providers that meet rigorous standards for state-of-the-art research focused on improving cancer prevention, diagnosis and treatment. City of Hope is known as a leading cancer researcher, with more than 450 patent portfolios and 95 active investigator-initiated drugs. The provider also runs a large bone marrow and stem cell transplant program.
Dr. Pat Basu, CTCA's CEO, said in an interview he looks forward to granting CTCA's patients access to City of Hope's clinical trials and bone marrow transplant program, which he said is the best in the country. Together, Basu said he thinks the providers will speed up important milestones in cancer research and treatment outcomes.
"Strategically, this a remarkably complementary fit," he said, noting there is no geographic overlap between the providers.
CTCA is a for-profit company with hospitals and outpatient clinics in three metro areas: Atlanta, Chicago and Phoenix. The company sold its hospitals in Philadelphia and Tulsa, Oklahoma earlier this year and has touted a focus on partnerships with health systems that rely heavily on telehealth.
CTCA spent the decade ending in 2016 operating under a federal injunction that barred the company from making unsubstantiated claims in its advertising. The Federal Trade Commission accused CTCA of making false claims regarding its success rates. CTCA cherry-picked patients based on insurance coverage and overhyped the success of its treatments, according to a 2013 Reuters investigation.
"I'm not concerned," Stone said when asked about CTCA's reputation. "I focus more on, frankly: What is it the cancer patients want? Cancer patients want timely access to doctors focused on treating their type of cancer."
City of Hope performed thorough due diligence into CTCA, and Stone said he personally visited the company's facilities in Atlanta and Phoenix. Stone's team emerged convinced that the two companies share the same values, Stone said.
Once the combination is official, City of Hope said it plans to transform CTCA into a not-for-profit organization. Basu will remain CEO of CTCA and will report to Stone. Stone said his team hasn't decided whether they'll pursue NCI designation for CTCA.
The broader goal behind the deal is to make cancer care available to more people, Stone said. Eighty percent of cancer care is currently delivered in community settings, but there's a widening gap between those who get access and those who don't, he said. The combined company would have 575 physicians and more than 11,000 employees across five states.
The deal would expand City of Hope's geographic reach. Its 36 care sites are currently limited to Southern California, in addition to a genomics institute it recently acquired in Phoenix.
Both providers partner directly with employers to offer workers cancer information and support. To that end, City of Hope launched its AccessHope program in 2019, and it now includes 17 Fortune 500 companies.
City of Hope posted a 2.7% operating margin in the nine months ended June 30, up from 0% in the prior-year period. Significant investment income pushed its excess margin to 27% in the 2021 period, when it made almost $700 million on about $2.6 billion in revenue.
As a private, for-profit company, CTCA is not required to disclose information on its financial performance.
Rumors have swirled about a potential CTCA sale since a 2020 report that the company was considering a private equity buy-out. Basu acknowledged there were other potential partners that expressed interest, but said City of Hope is more aligned with CTCA's mission and strategy.
Wednesday's news follows other deal action in the cancer treatment space. Last month, the first publicly traded oncology specialist debuted on the stock market following its merger with a special purpose acquisition company. The Oncology Institute, headquartered in the Los Angeles area, has 50 offices in four states and touts a value-based model of oncology care.
While City of Hope brings cutting-edge research and clinical trials to the table, Basu said CTCA brings a national oncology footprint and a recognizable brand.
"Ultimately I think this is tremendous for patients, it's tremendous for our collective organizations and outstanding for our employees on both sides," he said.
