General Catalyst's Acquisition of Summa Health Faces Scrutiny from Local Coalition

General Catalyst's planned $485 million acquisition of Ohio-based nonprofit health system Summa Health is encountering resistance from local advocates, who are calling for increased scrutiny of the deal's valuation and potential impact on community care.

Coalition Raises Concerns Over Valuation and Community Impact

A group called Summa Is Not For Sale, describing itself as "a coalition of concerned Ohio residents," has urged Ohio Attorney General David Yost to investigate the transaction thoroughly. In a letter sent on Friday, coalition members Matthew Charlebois and David Guran expressed concerns about the deal's price tag and its potential consequences for the local healthcare landscape.

The coalition argues that the $485 million valuation appears to reflect only Summa Health's debt, not the full enterprise value or its substantial net assets, which are reported to be nearly $970 million. This discrepancy has raised questions about the potential misuse of charitable assets and compliance with federal and Ohio nonprofit laws regarding prohibited inurement.

Regulatory Hurdles and Community Demands

The acquisition, which would transition Summa Health from a nonprofit to a for-profit entity, requires approval from multiple regulatory bodies, including the Ohio Attorney General's office, the Ohio Department of Insurance, and the Federal Trade Commission.

Summa Is Not For Sale has outlined several demands that they believe must be addressed before the deal closes:

1. An investigation into whether the transaction constitutes private inurement illegal under Ohio law
2. An independent valuation of Summa Health
3. A comprehensive community impact study
4. Placement of Summa's real estate into an inviolable trust to prevent potential sale-leaseback scenarios

The group has also circulated an open petition opposing the sale, which has garnered over 500 signatures to date.

General Catalyst's Stance and Future Implications

General Catalyst, through its Health Assurance Transformation Corporation (HATCo) unit, has characterized the purchase as a "long-term commitment to transformation that benefits the community." The venture capital firm has stated its intention for Summa Health to continue providing community benefit and essential services at current levels.

However, critics point to recent examples of corporate acquisitions in healthcare that have led to quality concerns, reduced services, and diminished community benefits. The outcomes of similar transactions, such as HCA Healthcare's purchase of Mission Health in North Carolina and the recent bankruptcies of private equity-backed health systems, have fueled apprehensions about the potential long-term effects of the Summa Health deal.

As regulatory reviews continue, the outcome of this acquisition could have significant implications for the future of nonprofit healthcare systems and the role of venture capital in community-based healthcare delivery.