The Oregon Health Authority cleared the way on Friday for a private equity-backed company to take over management of the state’s largest home health and hospice care network.
The major, multistate deal between Providence Health & Services and Compassus has been brewing for some time now. But even as it went into effect elsewhere, it has been held up for more than a year in Oregon as regulators examined the proposal warily.
Under the joint 50-50 partnership, Providence, a nonprofit, would outsource its home health care work to the for-profit home health care operator. And thus would emerge a new brand: “Providence at Home with Compassus.”
The Oregon Health Authority received over 250 public comments about the proposed transaction, many witheringly negative about the short-term-profit-seeking tendencies of the private equity financial model. One Providence employee, noting Compassus’ history of alleged Medicare fraud, described the proposal as a “massive threat to the care we provide to our community.”
Still others saw the deal as the best way forward for a home health care system facing severe financial strain, and said they feared the alternative was that a key portion of the system would simply disintegrate under crushing costs. Providence and Compassus, for their part, asserted that the deal would allow them to expand home-based care services to underserved areas of the state.
In the end, Oregon regulators seemed somewhat skeptical of such boosterism. And they acknowledged that to achieve financial sustainability, the joint venture may be incentivized to reduce its provision of less profitable services—such as in rural areas or for patients with medically complex conditions.
But regulators also found that the transaction posed little anti-competitive risk—a key question before them by law. And they said it would probably keep costs down.
The joint venture, they wrote in one analysis, “is expected to improve the profitability and financial stability of Providence’s home health and hospice business and should therefore help avoid further cuts to services in Oregon.”
A completed deal would be a victory for Providence, whose Oregon CEO in February described the transaction to WW as a key part of its effort to manage ballooning costs.
The massive multistate nonprofit health care system maintains home health care and hospice operations throughout Oregon’s western realms—in, for example, Portland, Beaverton, Salem, Hood River, Seaside and Medford. Collectively, its operations account for about 25% of Oregon’s home health care and 13% of its hospice care, regulators found in their analysis.
But despite this substantial footprint, these operations were money-losers in recent years, and accounted for a tiny fraction of Providence’s systemwide revenue; its core business is in hospitals and clinics.
Enter Compassus, a company with operations in some 30 states that is jointly owned by TowerBrook Capital Partners, a private equity firm, and Ascension Health Alliance, a nonprofit, faith-based health system.
In Compassus, Providence told regulators it had found a potential partner with deep operating expertise in the home health care space. At one point, the parties said the venture would allow them to “expand access to home-based care services in a way that aligns with Providence’s charitable and nonprofit mission and ultimately will improve both access to care and health outcomes.”
Clearly skeptical, regulators nonetheless propose that the deal may proceed under certain conditions: New management must maintain home health and hospice agency locations and services, invest $30 million in the Oregon agencies over five years, and continue to provide community benefit programs.
Members of the public have until May 30 to register their objections to the proposed approval. But the terms appear congenial to the two main parties. “Our organizations are confident the agreed-upon terms for this 50-50 joint venture will meet the needs of our caregivers and community,” Providence spokesman Gary Walker said in a written statement Friday.
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