In a merger of opposites, City of Hope to buy Cancer Treatment Centers of America for $390 million

City of Hope, the Los Angeles-based nonprofit hospital system, said Wednesday that it will purchase Cancer Treatment Centers of America for $390 million.

The deal, a study in contrasts, brings together a hospital system that is famous for research — City of Hope was instrumental in the development of synthetic insulin and the basic technologies behind many cancer drugs — with one better known for marketing that critics have described as overly aggressive and for controversies involving how it selects patients and their insurance.

It will also allow City of Hope, which currently only serves patients in Southern California, to expand its footprint geographically. Cancer Treatment Centers of America, or CTCA, spans three states with three hospitals and five clinics.

Robert Stone, City of Hope’s CEO, told STAT in an interview that the deal is entirely based around City of Hope’s mission to both care for cancer patients and develop new technologies.

The combined company will be “a one-of-a-kind national cancer research and treatment system,” Stone said. “[Our] scientific expertise with their network and patient experience system will create something very special.”

Creating that special something will require combining ingredients outsiders see as very different.

“I know CTCA is controversial, and there absolutely will be and should be questions about City of Hope acquiring a chain that’s known for being, let’s say, aggressive in its claims about cancer treatments,” said Arthur Caplan, a professor of bioethics at New York University Langone Medical Center and founding director of the Division of Medical Ethics there.

“I’m not saying they’re wrong, I’m just saying they’re loud and aggressive,” Caplan said. “That’s going to be something that the new owner is going to have to decide how to manage. It will become their ethical responsibility.”

In 2013, a Reuters investigation alleged that CTCA was refusing some patients treatment in order to improve the mortality statistics that it used to promote its cancer centers.

CTCA has also faced questions about its marketing. A 2016 study found that it spent $101.7 million promoting its services in TV, print, online, and other ads in 2014, accounting for more ad spending than all of its competitors combined. A 2019 analysis in The Lancet Oncology, a medical journal, likewise found that CTCA spent more than competitors on advertising and that its spending was not correlated with better results for patients.

“Some hospitals in our sample with excellent outcomes did not have particularly high advertising spending, and the highest-spending set of hospitals — operating as Cancer Treatment Centers of America — had poorer patient outcomes than all other hospitals in our sample,” the authors wrote.

Stone said that City of Hope’s due diligence on CTCA, which began this summer and included the CEO making personal visits to two of CTCA’s cancer hospitals, made him confident in the logic behind the deal.

“Quality of care, the patient experience, how patients are treated, and the outcome of their care — the clinical outcome and the quality of life — are non-negotiable for us,” Stone said. “They are of the utmost importance and I can tell you we’ve conducted, really, a thorough due diligence and believe that CTCA shares that culture of patient-focused and compassionate care.”

City of Hope, though it is based largely in California and has a smaller geographic footprint, is by far the bigger organization. It employs 8,000 people, including its hospitals, the genetic research hub TGen, in Phoenix, Ariz., and a new business that provides large employers with advice for employees with cancer as part of a health insurance plan.

CTCA, which has hospitals in Illinois, Arizona, and Georgia, employs 3,000 people. The firm recently closed hospitals in Tulsa, Okla., and Philadelphia.

Stone said that there are no plans to cut staff at the hospitals. “We’re not walking into this thinking about downsizing,” Stone said. “The opportunity that is before us means both organizations need to come together and move with the speed that cancer patients deserve.”

Stone said that City of Hope intends to make CTCA hospitals nonprofit. That, Caplan said, won’t obviate the challenges inherent in meshing together two cultures. Will they, for instance, have similar ideas about health equity? Among other opportunities, City of Hope could use the CTCA hospitals in its research activities. Do they have similar ideas around the sharing of data, or the involvement of patient voices, Caplan asked?

Thomas Tsai, a health policy researcher at the Harvard T.H. Chan School of Public Health and a surgeon, also noted that CTCA has been “controversial,” not only because of its marketing but because of questions about whether it accepts all forms of insurance and how it selects patient cases.

“I think it’s encouraging that CTCA will convert to a nonprofit status as part of the City of Hope System now,” Tsai said.

But even nonprofit hospitals, Tsai said, often generate a lot of cash flow, and that means nonprofits can be as eager to make money as for-profits. Health systems often make the argument to state or federal regulators who must approve the merger that joining forces will be better for patient care, Tsai said, but that’s not always the case. What will matter will be the details of how the two health systems are laced together.

“There [are] a lot of mergers that make sense on paper, but it doesn’t actually bear out,” Tsai said. “What drives improved care for patients is cultural change at the level of the patient-to-bedside experience. Putting new pieces together doesn’t mean all the pieces will result in a new puzzle that results in better cancer care for patients across the country.”

Stone said that City of Hope will operate the CTCA hospitals at the same standard as its existing hospital, a National Cancer Institute-designated cancer center. He also said that because the hospitals are in different geographic locations, he does not expect the merger to have a big impact on the price of care of patients’ access to it.