How did third-party firm appraise Summa Health ahead of planned deal?

Summa Health leadership has agreed to sell the hospital system to Health Assurance Transformation Company for $485 million, pending regulatory review. The number aligns with a third-party appraisal.
The appraisal by VMG Health provided a range of $445.474 million to $579.474 million for the hospital system. The planned purchase price falls between the low end and a “Midpoint” number of $512.474.
VMG cited its multiple methods, such as evaluating Summa’s costs and other health care transactions. VMG representatives also interviewed Summa management and representatives from an advisory firm.

A valuation of nonprofit Summa Health provides a range of values that track with the agreed-upon price to sell the hospital system to a for-profit entity.

The “fair market value” for the Akron-based hospital system came out to between $445 million and $580 million, according to a 2024 valuation conducted by appraiser VMG Health. The Beacon Journal obtained the report from the Ohio Attorney General’s Office, which is reviewing the proposed sale.

The $485 million planned purchase price of Summa by for-profit Health Assurance Transformation Co. (HATCo), a subsidiary of venture capital firm General Catalyst, landed above the $445.474 million figure provided as the “low” fair market value in a VMG Health report. However, it was below the $512.474 million figure marked as the “midpoint” value in the report.

The “high” end for the fair market value was $579.474 million, according to VMG’s 84-page report.

The VMG report listed a distribution date of Nov. 1, 2024, which was less than a week before Summa and HATCo publicly announced the terms of their proposed deal.

The Summa-HATCo transaction is under review by the Ohio Attorney General’s Office, the Ohio Department of Insurance, the Federal Trade Commission and the Cayman Islands Monetary Authority.

George Strickler, chair of Summa’s board of directors, previously said via email that VMG Health conducted the valuation using multiple methods.

In its appraisal, VMG cited the multiple approaches it used, such as evaluating Summa’s costs and other health care market transactions. The firm’s report also noted that VMG representatives interviewed Summa management “about past, present and prospective operating results of Summa Health” and interviewed representatives of Kaufman Hall, the hospital system’s strategic and financial adviser.

Summa paid VMG about $150,000 to conduct the valuation, according to a separate document on file with the state Attorney General’s Office.

VMG’s report was signed by three appraisers, all of whom are managing directors at the firm.

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What’s Summa getting in the proposed sale to HATCo?

In HATCo’s proposed acquisition of Summa, the for-profit company plans to eliminate Summa’s debt, which as of November was about $859 million, according to a document on file with the Ohio Attorney General’s Office.

HATCo also 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 news release from Summa and HATCo. The $350 million total averages out to a roughly $70 million annual capital spend over the five-year period, an approximate 27% increase beyond Summa’s current annual capital spend of approximately $55 million, per the state Attorney General’s Office report.

Patrick Williams covers growth and development for the Akron Beacon Journal. He can be reached by email at [email protected] or on X, formerly known as Twitter, @pwilliamsOH.

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