Cagle interview: See what Cone's CEO says about accepting Risant acquisition offer

The announcement of Cone Health being acquired by Risant Health — a startup nonprofit charitable group based out of Washington, D.C. — seemed to come out of the blue Friday.

Cone’s executive management and board of trustees say, however, that the proposed transaction that’s projected to close by year’s end represents the culmination of nearly a year’s worth of due diligence. It also recognizes that the Greensboro not-for-profit healthcare system has reached a pivotal “tipping point” in its mission of improving the quality and equity of care within its market.

The board and chief executive Dr. Mary Jo Cagle stress Cone has been in a position of wanting to — rather than needing to — find a healthcare partner.

Cone serves about 500,000 patients, foremost in the Triad. It has more than 13,000 employees, more than 700 physicians and 1,800 partner physicians. Its network features four acute-care hospitals, a behavioral health facility, an accountable care organization and a health plan.

The board’s and Cagle’s confidence in Cone’s financial stability and strategic vision was displayed foremost in April in the unveiling of an ambitious $150 million community wellness initiative “to improve health and increase life expectancy in underserved areas” through real-estate purchases and opening new clinics.

Although the focus would be primarily on east Greensboro, ripple effects were planned throughout its market.

Yet, Cagle said in an interview with the News & Record that she and the board had a nagging concern that the planned five-year rollout may not be timely enough.

“How long would take it us to reach our strategic goals on our own vs. with a healthcare partner?” Cagle said she and board members were asking.

“We determined it was just going to take us much longer on our own, and we are committed to doing the right thing for this community.

“People could die while we’re trying to reach our goals, whose lives we might be able to save by accelerating this work,” she said. “That was the tipping point.”

Why Risant?

After a planned sale to Sentara Healthcare fell apart in 2021, the Cone board began having preliminary conversations with potential partners when Risant came courting about a year ago.

Risant was formed in 2023 as an affiliate of the health foundation arm of Oakland, Calif.-based Kaiser Permanente.

Risant represents a collective of doctors, hospitals and health insurers with a short-term goal of acquiring and overseeing four to five not-for-profit U.S. healthcare systems.

Its first acquisition in April 2023 involved Geisinger Health of Danville, Pa., which serves rural parts of the state.

During due diligence, Cagle said the board, management and clinical staff became convinced that partnering with Risant would enable Cone to accelerate its shift to value-based care and promoting health equity.

Cone agreed to be acquired in exchange for an undisclosed capital investment pledge.

According to Modern Healthcare, Risant has pledged to Geisinger at least $100 million through 2028 for expanded care delivery and health plan services, as well as $115 million a year over the next decade to support research and education initiatives.

Cagle said the groups won’t be able to provide a precise capital investment commitment until after regulatory approvals are secured and the transaction is closed.

“Of course, the finance piece was important to everyone,” Cagle said. “Let’s just say there is a significant enough (financial commitment) that our board was willing to vote yes to this deal.

“But we also looked at would this help us advance our strategy, and do it in a way that would be faster and less expensively than we could do it on our own.”

Importance of value-based care

Cagle feels the need to explain what value-based care means to Cone “since the term gets tossed around a lot.”

“It means high-quality care at lower costs, going away from the fee-for-service model where you pay for every little thing you get,” Cagle said. “You pay one global fee, and we keep you healthy through preventive care and a focus on wellness than sick care.

“That has been our vision all along on transforming health care, and this gives us the opportunity to work with Kaiser Permanente, who has 80 years of expertise doing this and the tools, technologies and platforms it is bringing to Cone patients and clinicians.”

Risant and Kaiser said their goal is to “bring together like-minded organizations, increase access to value-based care and coverage, and raise the bar for approaches that bring the best health outcomes.”

Risant chief executive Dr. Jaewon Ryu told Modern Healthcare that “much like Geisinger, I think Cone has walked this talk for many years, and as a result, plays a pivotal role in the health of the community, so the match was absolutely there.”

“Cone Health’s impressive work for decades in moving value-based care forward aligns so well with Risant Health’s vision for the future of health care,” Ryu said.

Cagle said that “anytime someone embarks on something new, there’s going to be a certain degree of risk involved, and if you are wise, you should have some apprehension.”

“We’re not novices. Cone has been doing risk-based care for almost 13 years, and just under 50% of our revenue is based in risk-based care today, so we’re not new to this.

“We want to accelerate that, to do more of it faster than we’ve done over those 13 years.”

Not inevitable

Cagle said Cone’s management and board didn’t believe joining another healthcare group was inevitable in the aftermath of the Sentara plan collapsing.

“We worked with national consultants to determine whether we could do what we’re envisioning (with Risant) on our own,” she said. “Because we are so stable financially, we were told Cone has the ability to stay independent.”

A major difference between the Sentara and Risant negotiations included the involvement of a Cone group of 14 physicians “from multiple specialties all across our footprint,” Cagle said.

Cagle stressed that the expansion of Atrium Health Wake Forest Baptist’s expansion into Greensboro played “no role whatsoever” in Cone entering into the Risant partnership.

Atrium Health, through its merger with Advocate Aurora to form Advocate Health, is part of the nation’s third-largest not-for-profit healthcare system.

Atrium has made no secret of wanting to establish a major presence in all three urban Triad cities, with High Point Regional Medical Center under the Baptist umbrella.

Baptist has more than 30 primary, specialty and urgent-care practices in Greensboro, including 14 urgent-care clinics.

Cone and Baptist still await a resolution on Cone’s appeal of state health regulators’ approval of Baptist’s $246 million community hospital that would be located at 2909 Horse Pen Creek Road — about 2.1 miles from Cone’s MedCenter Greensboro facility.

The N.C. Office of Administrative Hearings had set a May 20 deadline after the filing of Cone’s appeal on Aug. 24.

However, Cone chose to dismiss the original appeal and refile it in late April to restart the 270-day time period and allowing potential settlement negotiations with Baptist to continue.

Getting regulatory approvals

Under North Carolina law, the attorney general reviews any transaction in which a charitable corporation — like Cone — sells a majority of its assets.

The potential Cone acquisition by Risant will require federal and state regulatory approvals.

Approval from Stein is not required, but the office can sue to intervene in this type of acquisition. A potential complication is that Stein is the 2024 Democratic nominee for governor.

Cagle said she had reached out to Attorney General Josh Stein and Gov. Roy Cooper about Cone being acquired.

Cagle expressed confidence of a smooth regulatory approval process given no marketplace overlap with Kaiser Permanente and Risant’s partnership with Geisinger in Pennsylvania.

“We are ready to go through the process, and we are hopeful of it going well,” Cagle said. “This represents such a different legal model” than Sentara.

“This is not the same model as HCA (with Mission Hospital in Asheville), not the same as Novant had at the coast (with New Hanover Regional in Wilmington) and Atrium with Wake Forest Baptist.

“This model is intentionally going to value-based care to lower the cost of care and increase access to care, and I believe that would be helpful to anyone running for office to support.”

Cagle said the post-Sentara announcement process taught Cone “it is better to be transparent as possible with your employees, to involve your clinicians in the process, which we did this time.”

“And, it’s better not to try to do a deal during a pandemic. This is not a knock on anything or anyone involved in that (Sentara) deal,” Cagle said.

“It would have happened to anybody when you try to do most of that deal through Zoom. That put everybody at a disadvantage. You cannot do deals of this magnitude without face-to-face meetings to get to know each other.”

Maintaining Cone’s culture

Cone said it will “maintain its brand, name and mission, and maintain its own board, chief executive and leadership team. It will continue to work with health plans, provider organizations and independent physicians.”

“Patients will see the same doctors, the same nurses and the same staff in the same locations they do today. We do not anticipate changes in the types of care we provide as a result of becoming part of Risant Health.”

Those factors were non-negotiable, Cagle said.

Cagle cited, as have most recent major healthcare system combinations affecting the Triad, that its clinical staff would benefit from exposure to different training strategies “to enable them to grow in expertise, collaborate with our colleagues, and opportunities for career development.”

“There is the potential for job growth in this area as we get better at value-based care,” Cagle said.

Cagle said Cone is aware of the perception of having an out-of-state parent company controlling its decision making and destiny — whether corporations such as BB&T Corp., Jefferson-Pilot, Reynolds American Inc. or Wachovia Corp., or healthcare systems such as Atrium and HCA.

“All of our money stays local,” Cagle said. “Our local board will continue to make the decisions about quality, safety, physician credentialing and things that affects our community.

“Risant doesn’t own a hospital. They don’t have a finance, human resources or marketing department. They have a board that works with us to get us what we need and to help align our visions.”

Cagle said that with Geisinger being based in rural Pennsylvania, “I’m really excited about what we can learn to help us better provide access and serve our rural areas. We have a lot we can improve upon in Rockingham County.”

In exchange, Cagle said she believes Cone has a lot to offer in terms of health equity to Geisinger and to other potential Risant acquisitions.

Cagle said it is “very significant” that Cone succeed in persuading the local community and employees that bigger will be better in this instance.

“We want to limit any confusion for our patients and for the people who work here and trust us as Cone is today,” Cagle said.

“It’s important for the leaders of this community to have a good relationship with us and know that when they attempt to bring other businesses to this community that those businesses can trust Cone Health and have a good relationship with us as well.”

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