As proposed deals in Boston, Detroit and Youngstown, Ohio, show, investor-owned hospital companies are interested in markets that don't fit their traditional targets, and healthcare reform is a prime reason, according to a report by Moody's Investors Service.
As healthcare reform goes into effect, markets with higher uninsured populations could become more attractive to investor-owned hospital companies, according to Moody's. Reform also will drive consolidation by placing greater pressure on capital needs, such as investments in information technology, the report said.
The would-be acquirers—Cerberus Capital Management in Boston, Vanguard Health Systems in Detroit and either Ardent Health Services or Community Health Systems in Youngstown—are alike in being stable companies with ready access to capital, Moody's said.
Meanwhile, two corporate acquisitions are bets on the specific services involved, according to Moody's. The proposed acquisition of Psychiatric Solutions by Universal Health Services could be a bet that behavioral services will benefit from the expansion of Medicaid envisioned under the reform law, as Medicaid is already a large payer in behavioral care. Select Medical Corp.'s proposed acquisition of Regency Hospital Co. would make Select Medical the largest long-term acute-care hospital operator, which might help it navigate bundled payments, another delivery change encouraged by the reform law.
