General Catalyst to acquire Ohio nonprofit health system

General Catalyst is set to make history: It’s about to be the first venture capital (VC) firm to purchase a health system.

The VC giant announced this month that it plans to acquire Ohio-based health system Summa Health through its newly formed company, the Health Assurance Transformation Corporation, or HATCo, which aims to use the health system as a testing ground for health tech developed by the VC firm’s portfolio companies.

“This new structure will better serve our communities clinically, economically, and socially. With HATCo, Summa Health will be able to increase local investment and introduce new resources that allow us to expand access to affordable, quality, coordinated care,” Cliff Deveny, president and CEO of Summa Health, said in a statement.

Summa Health, based in Akron, employs roughly 8,500 workers and has three hospitals, 14 medical centers, a health plan called SummaCare, a multispecialty group practice, an entrepreneurial entity, a research and medical education program, and multiple foundations.

HATCo and Summa Health will enter a “due diligence period” for the next few months to hash out the details of the deal, and plan to sign a final agreement “in the next several months,” according to a statement from the health system, which added that no healthcare services will be disrupted during the process.

Neither party disclosed the deal’s financial terms. Marc Harrison, HATCo’s CEO, previously told Forbes the company expected to spend $1–$3 billion to purchase a health system. Deveny told Axios that Summa Health’s annual revenues total roughly $2 billion.

Deveny will continue to serve as the health system’s CEO, Summa Health executives said in a statement. The health system’s name and logo will also remain unchanged. Harrison told Axios that there are no planned job cuts at Summa Health following the deal’s close.

Summa Health executives said in a statement that they don’t expect the new ownership model to affect the health system’s relationships with insurers or cost of care for patients.

“Rather, we expect this relationship will allow us to introduce new technology and innovation that enhances efficiency, affordability, and access to the quality care for all those we serve,” executives said in a statement.

The deal will transform nonprofit Summa Health into a for-profit entity, but the health system said it will maintain its “commitment to charity care.”

Summa Health COO Ben Sutton told Axios that converting to a for-profit will be “a lot of work”—the health system will be required to start paying taxes and meet the rigorous reporting standards set by the Securities and Exchange Commission. But health system executives said that they believe the transformation will be a “great economic benefit to [the] region.”

In their blog post, Taneja and Harrison argued the deal is different from those involving private equity firms buying health systems because General Catalyst isn’t planning on turning a quick profit.

“We are operating over longer time horizons—this is not a quick flip but a long-term commitment to transformation that benefits the community,” Taneja and Harrison wrote.

Rebecca Springer, lead healthcare analyst at market data company PitchBook, said in a statement shared with Healthcare Brew that because General Catalyst is a “‘pure’ VC firm” and not a private equity firm, it “has a very different culture and value proposition as an investor.”

Some healthcare experts have expressed ethical concerns over a VC-owned health system.

“The biggest stumbling block will be the potential shift in focus from patient-centric care, given Summa Health’s previous nonprofit status, to profit maximization, which could undermine the quality of care and healthcare accessibility,” Dave Latshaw II, co-founder of AI drug development company BioPhy, said in a statement shared with Healthcare Brew. “Balancing these two facets—innovation and patient welfare—will be the critical determinant of this venture’s success or failure. If successful, the model could be transformative.”