Barnes Wendling CPAs Director and Business Valuation Lead Steven Piatak, CPA, ABV, CFF, contributed to this article.
Akron Beacon Journal: Web Edition Articles (OH)
April 18, 2025
Summa-HATCo deal sparks a billion-dollar question over health system's final sale price
By Patrick Williams, Akron Beacon Journal
After Summa Health announced its plan to be acquired by venture capital-backed Health Assurance Transformation Company (HATCo) in January 2024, opponents picked apart the proposal and declared it a bad deal.
One of the objections voiced by the activist group Summa Is Not For Sale is the $485 million price. The valuation should be far higher, the group has argued. Summa and its suitors, however, stand by the price as they await regulatory approval of the acquisition.
So, whose numbers are the closest to correct? And how were they calculated? The Beacon Journal sought insights from each side and asked some financial experts to weigh in on the process.
The Summa/HATCo valuation was prepared by a third-party appraiser and is outlined in documents submitted to the Ohio Attorney General, one of the offices reviewing the proposal. The Beacon Journal requested and received a copy of that application from the state.
A Summa Is Not For Sale representative acknowledged the group arrived at its value estimate without access to the full scope of financial data used for the Summa/HATCo proposal.
But one of the activist group's assertions has been that Summa itself is an entity worth more than $900 million — and it insists the sale price should be in that range.
A closer look at the matter shows that while Summa's worth indeed exceeds that amount, HATCo's assumption of more than $850 million in debt lowers the total that would change hands if the deal is approved.
Here's a look at how each side approached its valuation for the deal.
Inside Summa Health's appraisal of proposed HATCo deal
George Strickler, chair of Summa's board of directors, stands by the agreed-upon sale price, noting that multiple calculations were performed by the third-party appraiser to reach the proposed cost.
A document that Summa and HATCo filed with the Ohio Attorney General's Office referencing their Oct. 31, 2024, agreement states, "HATCo is committing more than $1 billion to the acquisition of and investment in the assets of Summa, including equity ownership of the insurance plan companies and certain other entities."
HATCo's initial payment of $485 million will be added to Summa's current cash-based assets to pay down the hospital system's debt, which as of November was about $859 million, according to the document. The free amount of cash on Summa's balance sheet reported in a mid-October disclosure was $937 million, Dr. Cliff Deveny, Summa Health president and CEO, said in November.
Further, HATCo committed to $350 million in capital funding over five years to make sure resources are available "for routine purposes" and to invest in technologies that enable the hospital system's growth, according to the report on file with the state Attorney General's Office and a November press release from Summa and HATCo. The $350 million total averages out to a roughly $70 million annually capital spend over the five-year period, an approximate 27% increase beyond Summa's current annual capital spend of approximately $55 million, per the report.
"In addition to the annual capital commitment, HATCo seeks to ensure there are sufficient dollars available to do future phases of the transformation plan that will be developed collaboratively with Summa leaders, clinicians, and front-line healthcare workers," the report said.
A separate commitment by HATCo of $200 million over seven years is "intended for strategic and transformative investments and innovation, which will be more fully defined as Summa transitions into its new model and through a stabilization phase," the report said.
In addition, a new community foundation created through the deal will have "a combined amount estimated to be in the hundreds of millions of dollars to be used to promote the health of the communities served by Summa," according to the report on file with the Ohio Attorney General's Office that the Beacon Journal obtained.
The exact amount of seed funding for the new foundation hasn't been finalized. The funding will include yet-to-be-determined final closing adjustments, including working capital, along with the remaining restricted funds in the Summa Foundation, the health system's philanthropic arm.
In 2024, Summa's reported net assets with donor restrictions totaled about $55 million.
What does Summa is Not for Sale say about the valuation?
To activist Jeff Barge, HATCo's plans to use cash that Summa already has on hand to pay down the hospital system's debt doesn't justify the purchase price. It's one of many concerns that Barge, a researcher with the Summa is Not For Sale coalition, has voiced about the deal. In March, the Beacon Journal reported on the coalition's 14 demands for HATCo parent company, venture capital firm General Catalyst.
The purchase price of $485 million, Barge said via email, "seems to be related to some factors that aren't public. As if they said, just give us your hospital and we will pay half your debt."
Barge, who works in communications and formerly worked as a business journalist, said via email, "I admit I don't know much" about performing valuations, but sent multiple calculations and figures to the Beacon Journal before and after acknowledging the limits of his expertise.
Following several conversations with a Beacon Journal reporter over the course of about a month, including examining Summa's filing to the Ohio Attorney General, Barge lowered an estimate that he originally pitched and concluded Summa's reported net assets above $900 million represent a fair value for the hospital system.
Who helped Summa Health reach its valuation?
Summa spokesman Mike Bernstein provided a statement attributed to Strickler, Summa's board chair, to explain how the valuation was performed.
The board worked with Summa's strategic and financial adviser, Kaufman Hall, and hired independent third-party valuator VMG Health to perform the valuation, Strickler said.
Strickler said valuator VMG Health used multiple valuation methods to determine "that the $485 million purchase price falls within its analyzed range of fair market value."
The independent assessment gave the board "confidence that this transaction reflects the true value of our organization and the vital role Summa Health plays in improving the health of all those we serve across the greater Akron region," Strickler said.
A Kaufman Hall spokesperson declined comment about the process, citing company policy. A representative for VMG Health could not be reached for comment. Milly Gillis, partner and chief of staff at General Catalyst, also declined to comment.
Summa paid VMG Health about $150,000 to conduct the valuation, according to a document on file with the Ohio Attorney General's Office that was signed by Deveny.
"The Summa Board and its external advisors all firmly believe that not only are we receiving appropriate fair market value, but that we also have positioned Summa Health to have access to resources to transform health care for those we serve, today and into the future," Strickler said.
For about a decade, Summa has been exploring strategies to remain robust, he said.
"At every step, our focus has been on securing a strong, sustainable future for Summa Health – one that ensures we can continue to deliver high-quality, accessible care to the people and communities who rely on us," Strickler said.
The agencies reviewing the deal are the Ohio Attorney General's Office, the Ohio Department of Insurance, the Federal Trade Commission and the Cayman Islands Monetary Authority, Deveny previously said. Representatives from the two state agencies said via email that the deal is still under review, and representatives from the two other agencies declined comment.
Northeast Ohio business, health care experts discuss uncertainties
Eric Brisker, chair of the University of Akron's finance department and associate professor in finance, who is unaffiliated with the deal, said there isn't enough publicly available information for parties not associated with the deal to make a determination of a fair price. But he called the promise to pay off Summa's debt "a significant part of the investment."
It's difficult for an outside party that isn't privy to the full financial picture of a nonprofit entity such as Summa Health to value that nonprofit, Brisker said.
The methods that are generally used to value public, for-profit companies don't apply when valuing nonprofits, he said.
As with valuing banks and insurance firms, valuing a hospital also presents a unique challenge, Brisker said, because these entities are "heavily regulated, and their valuation process is completely different than what we would say typical valuation processes are."
Valuations of public companies consider free cash flow generation for shareholders, Brisker said.
"And I think that would be the main difference in this case, is that there are no shareholders for Summa," Brisker said. "It's just about pretty much the providing of health care to as many people as possible at the lowest cost."
Factors that influence valuations of health care organizations include total assets and debt, operating performance, bottom line and profit, said Michael Petrochuk, who retired after most recently serving as dean of Walsh University's business school and as professor of health care management.
"Some of the softer areas that we look at are things like, what have the trends been in market share?" he said. "What type of service mix does that organization offer? And finally, where the medical staff fit into that. Are they positive? Are they nurturing?"
Petrochuk, who also has no association with the deal, said he is not a valuation expert. He also offered for transparency that he worked at Summa precursor Akron City Hospital, as well as Akron General. He said he couldn't comment on the fairness of the deal.
Petrochuk posed the question of whether there were other acquisition deals on the table that came in lower than HATCo's and if this might have been the best one available.
Other, lower offers did not come in between when a planned acquisition by Southfield, Michigan-based Beaumont Health fell apart five years ago during the height of the COVID-19 pandemic and when Summa signed its agreement last year with HATCo, Bernstein said via email.
Summa's board and leadership team "have been focused on opportunities that would ensure the best health care access for our region and help Summa build upon our current strengths and enhance our organization," Bernstein said. "The proposed partnership with HATCo is a strategic one with an organization that shares our vision and is the right partner to drive Summa Health's growth and long-term sustainability."
HATCo's planned payoff of Summa's debt eliminates costly interest payments, but Brisker said in an email the savings from not having to pay interest wouldn't be factored into a valuation.
However, Brisker said via email, "The fact that HATCo is going to pay off debt of Summa post-acquisition signals that the financial health of Summa will improve and it will be better able to provide medical services to the region."
Considering both the $485 million purchase price and HATCo's promise to take on the $850 million in debt, Brisker said, "it's really like a $1.3 billion price that HATCo is paying to take over Summa."
Steven Piatak, director of valuation services at Barnes Wendling CPAs, who is unaffiliated with the deal, reviewed a Summa financial disclosure with Barge and a Beacon Journal reporter. Piatak said various information that is not known to the public could influence a valuation, such as "accounts receivable that may or may not be collectible" and "underlying investments held that might need to be marked to a market value as opposed to their historical cost."
HATCo could also see value in taking ownership of Summa that others don't necessarily see, Piatak said.
"Whatever that might be, whether it's through related companies or changes that they believe they can implement, they think that they may be able to make this a much more profitable enterprise — or through operational changes, more efficient — that they can then realize more money on the bottom line," Piatak said. "Or they may have related companies (so) that they can build synergies together with the related entities, to where it basically is one plus one equals five."
UA finance chair: Due diligence a must on part of parties, regulators
In most cases, Brisker said a company planning to be acquired would invite a third-party valuation firm to come in, and the acquiree, also known as the target firm, would "have to open up all their books" for the appraiser to do their due diligence.
The fact that a major hospital system is the target firm, Brisker said, adds an "additional layer" of due diligence that needs to be performed by the regulators reviewing the deal.
"And there is the additional hurdle that you're talking about a crucial health care provider in the area," Brisker said. "So we're not talking about somebody that's making cars here or something. We're talking about health care of a huge area."
Private equity markets are inefficient compared to public markets because the lack of transparency around target firms' finances can lead to disagreements about the value of those firms, Brisker said.
Piatak said venture capital firms raise money from investors with promises of returns; they can also borrow money from investors, he said.
Venture capital firms such as HATCo and General Catalyst still owe returns to their investors even if they're making investments from their balance sheet as opposed to venture capital or private equity funds, Piatak said.
HATCo CEO Dr. Marc Harrison said in November that HATCo is funded by General Catalyst's balance sheet.
Deveny said in July that General Catalyst is only looking for a 1% to 2% return on its purchase of Summa.
Petrochuk said he wasn't sure how HATCo is going to turn a profit. In an April 4 interview, he pointed more broadly to investors' concern surrounding plummeting stocks globally because of tariffs to highlight that investors care about where their investment money goes.
"When we invest money, we don't do it altruistically," he said. "At the end of the day, we want to make some cash. And if we have a business out there that we are investing in, there's going to come a point in time when we're going to say, 'All right. I want to start making some returns on that significant investment that I just made.' Where's that money going to come from?"
Patrick Williams covers growth and development for the Akron Beacon Journal. He can be reached by email at pwilliams@gannett.com or on X, formerly known as Twitter, @pwilliamsOH.
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