Is Summa Health being sold at half price?

Three common valuation methods say that the $485 million offer by private equity firm General Catalyst for the $1.5 billion revenue hospital firm comes up short

February 4, 2025 – (Akron, Ohio) – Activists and valuation experts are saying that the proposed acquisition of non-profit hospital chain Summa Health of Akron, Ohio by private equity firm General Catalyst is underpricing the company by 50 percent – or even more.

While Summa Health and General Catalyst have agreed to a sale price of $485 million – the proceeds to be used to create a Summit County based charitable foundation of unknown size – standard valuation models price the company as being worth $1 billion to $2.79 billion.

It’s hard to believe that Akron Mayor Shammas Malik is willing to leave a half a billion dollars on the table,” says local activist Jeff Barge. “That’s money that could be used to meet residents many needs in healthcare and childcare.”

The deal is currently in the hands of Ohio Attorney General Dave Yost and the Ohio state insurance department for final evaluation.

We expected the deal to be north of $1 billion,” said Matthew Charlebois, leader of a an opposition group called the Summa is Not for Sale Coalition, in an email. “So the $485 million announcement was a slap in the face, adding insult to injury of an already bad deal for Akron.”

The response of Akron city officials to the shockingly low price seems to be one of apathy. “Akron City Council is not a party to this transaction,” Dr. Joan Williams, a spokesperson for the Akron City Council said in an email. “Your question (about valuation) is best directed to Summa Hospital.”

In recent years, acquisition of hospital chains by private equity firms have proven to be disasters – for everyone but the private equity firms, which have made out handsomely

Basically the private equity firms have looted the hospital chains,” said Barge. “After acquiring them, they sell the hospital’s real estate for 100s of millions of dollars to investment firms, with the hospitals required to lease them back. Then they pay themselves huge dividends.”

Two hospital chains that followed this path, Stewart Healthcare and Prospect Medical Holdings, declared bankruptcy in 2024, shuttering several hospitals and leaving the possibility of closing several more. The acquisition of health care firms by private equity is currently the subject of Senate hearings.

In one of those situations, Prospect Medical’s private equity owner, Leonard Green & Partners, sold off its real estate holdings to Medical Properties Trust for $1.386 billion and paid itself and its staff a $457 million dividend in 2018. It went into bankruptcy in December.

In the case of Stewart Healthcare, whose private equity owner was Cerberus, the real estate was sold off to Medical Properties Trust and others for $301.3 million, and Cerberus ended up making $800 million on its investment overall. Stewart declared bankruptcy in 2024 also.

In both cases, the CEO of the healthcare company scored big. Stewart Healthcare’s CEO Ralph de la Torre paid himself $250 million over four years, and Prospect Medical’s Sam Lee took home over $90 million after the sale leaseback.

Summa Health CEO Dr. Cliff Deveny is currently paid $1.477 million. It has not been disclosed how this sale will benefit him personally.

Because he is heading a non-profit, Dr. Deveny has a fiduciary duty not to self-enrich at the expense of the public, so undue compensation could cause litigation,” said Barge.

It has not been disclosed whether General Catalyst intends to sell off Summa Health’s real estate and lease it back.

In terms of how Summa Health might more fairly be valued, there are three standard valuation methods.

1. Revenue Multiple Approach

Using a typical revenue multiple of 1x to 1.5x for hospital systems, based on Summa Health’s 2023 revenue of approximately $1.86 billion:

  • Valuation Range : $1.86 billion to $2.79 billion​

2. EBITDA Multiple Approach

Assuming Summa Health operates with an EBITDA margin of 10% (a common figure for healthcare systems), its estimated EBITDA would be around $186 million. With EBITDA multiples in the 8x to 12x range:

  • Valuation Range: $1.49 billion to $2.23 billion.

3. Net Asset Value Approach

Summa Health’s 2023 debt elimination plan suggests around $850 million in debt. If we estimate the net asset value by adjusting for this debt and potential cash assets:

  • Valuation Estimate : Over $1 billion, considering its ability to clear significant debt and remain operationally strong​
“According to news reports, General Catalyst raised $750 million specifically for healthcare investments last October,” said Barge. “That’s the minimum it should be paying for Summa.”

A potential downside to the transaction for the Akron community is that private equity firms running hospitals often skimp on care, according to a recent 162-page report from the U.S. Senate:

–A review of 55 studies has found that private equity investments were associated with up to 32 percent higher costs to patients and insurers.

–Another study found that private equity-acquired hospitals have lower staff-to-patient ratios and less experienced or licensed staff than other hospitals.

–A recent Harvard Medical School study of Medicare patients at hospitals before and after private equity acquisition found that patients suffered 25 percent more hospital-acquired complications, including 27 percent more falls and 38 percent more bloodstream infections, post-acquisition.

William Reid
A science writer through and through, William Reid’s first starting working on offline local newspapers. An obsessive fascination with all things science/health blossomed from a hobby into a career. Before hopping over to Optic Flux, William worked as a freelancer for many online tech publications including ScienceWorld, JoyStiq and Digg. William serves as our lead science and health reporter.