General Catalyst to Buy Ohio-Based Nonprofit Summa Health

The venture capital firm's HATCo business will acquire a health system, pending regulatory approval.

Just three months after declaring its intention to purchase a health system within a year, General Catalyst has found a partner to act as the proving ground for its concept.

The venture capital firm announced that its business spinoff Health Assurance Transformation Corporation (HATCo) has signed a non-binding letter of intent to acquire Summa Health, an Ohio-based nonprofit integrated delivery system.

The two organizations said they are working on finalizing an agreement in the next several months that would make Summa a wholly owned subsidiary of HATCo and convert the health system into a for-profit operator. Financial terms of the deal were not disclosed.

It’s unclear, however, if the acquisition will pass regulatory review, with Summa’s status change to a for-profit likely being the most important sticking point for regulators.

If the move does go through, it will further bridge the gap between venture capital and providers and give HATCo co-founders Marc Harrison and Hemant Taneja their opportunity to see through their vision, albeit with sizable risk.

When the duo proclaimed their plan of buying a health system this past October, the news raised eyebrows across the industry. Venture capital rarely takes that bold of a step in healthcare and even though General Catalyst already partners with 20 health systems across 43 states, Harrison and Taneja were adamant they needed a health system to implement and test new technology unencumbered by cash-strapped and risk-adverse providers.

“HATCo is grounded in the belief that by making health systems more profitable, vibrant and innovative, they will be better equipped to serve everyone in their communities with greater impact,” Harrison said in the news release. “We are thrilled to partner with Summa Health to bring this vision to life. The current national healthcare system is fragmented and creates barriers to care and wellness. In partnership with Summa Health, we intend to prove that a model that’s better for patients can also be good for business and create a blueprint for other systems and communities.”

In Summa, General Catalyst is taking on a health system that is dealing with financial struggles, with the organization recording an operating loss of $37 million for the first nine months of 2023, which followed an operating loss of $39 million in 2022.

In a community announcement on its website, Summa said CEO Cliff Deveny will continue to lead the system.

“We believe that in HATCo, we have found a truly strategic partner that is committed to our model and the culture that drives who we are,” Summa’s board of directors wrote. “This is a unique and unparalleled opportunity to invest in our care and community to a greater degree. We are excited about advancing our shared vision to create a new, more proactive, affordable and equitable system of community-based, lifelong healthcare.”

In a blog post, Harrison and Taneja addressed concerns that the acquisition is “another ‘private equity’ deal.” They pointed to their focus being on innovation instead of taking out costs, as well as to their expected timeline for the move, writing that “this is not a quick flip but a long-term commitment to transformation that benefits the community.”

As part of the transaction, HATCo said it will also create a community foundation to invest into social determinants of health in the Greater Akron area.

While the industry will be keeping a close eye on how the partnership plays out, it will first be in the hands of regulators to determine whether it even gets off the ground.