The nation's hospitals continued to change hands at a record-setting pace in 1996.
The number of hospitals involved in merger and acquisition activity increased 5% to 768, according to MODERN HEALTHCARE*'s third-annual list of mergers and acquisitions. Last year's transactions involved 735 hospitals, also a record year for hospital deals.
Nearly two in five of the nation's 5,200 nonfederal hospitals have been involved in merger and acquisition activity in the past three years, MODERN HEALTHCARE*'s compilation indicates.
The brisk activity in 1996 came without a major corporate acquisition by Columbia/HCA Healthcare Corp., the nation's largest hospital chain.
In fact, Nashville, Tenn.-based Columbia added fewer hospitals last year than at any time since MODERN HEALTHCARE* began compiling its merger and acquisition list in 1994.
A comparison of deals prior to 1994 is difficult because the American Hospital Association was the only organization tracking such activity. It recorded 18 mergers in 1993.
The 1996 list consists of 235 deals that were either finalized or pending, up slightly from 230 in 1995.
The list includes some overlap because of deals announced in 1995 that didn't close until this year. For example, Catholic Health Initiatives opened its Denver headquarters and became operational in July after being formed through the $4 billion merger of Sisters of Charity Health Care Systems, Catholic Health Corp. and Franciscan Health System in 1995.
Despite the absence of a major corporate acquisition by Columbia, the bulk of this year's hospital transactions came from an increased number of corporate deals by medium-size companies. There were 11 corporate mergers in 1996 compared with six last year.
Instead of Columbia, it was its chief investor-owned rival, Santa Barbara, Calif.-based Tenet Healthcare Corp., that announced the biggest acquisition in 1996. Tenet cemented itself as the No. 2 hospital chain after its $3.1 billion merger with the third-largest chain, OrNda HealthCorp of Nashville. That deal, expected to close in March of 1997, involves 126 hospitals, or 16% of the hospitals on the list.
The number of individual community hospitals involved in merger and acquisition activity dropped 39%.
There were 272 community hospitals that acquired or merged with other hospitals, health systems or chains via 181 deals. By comparison, there were 445 individual community hospitals involved in 224 deals in 1995.
For the purposes of MODERN HEALTHCARE*'s list, individual community hospitals don't include: major teaching hospitals or academic medical centers; psychiatric or other specialty hospitals; acquisitions of hospitals that were already owned by an investor-owned chain or swaps of hospitals among investor-owned chains.
Columbia was involved in most of the individual acquisitions of hospitals that didn't bring together corporate chains.
As of last week, 17 of the 28 Columbia acquisitions or joint ventures that closed in 1996 involved tax-exempt hospitals. Columbia has another 14 deals with tax-exempt hospitals that are still pending. Those are included on MODERN HEALTHCARE*'s list.
By comparison, Columbia completed the acquisition of 33 tax-exempt hospitals in 1995.
Despite the growing rhetoric about investor-owned chains gobbling up not-for-profit hospitals, only 63, or 8%, of the hospitals on MODERN HEALTHCARE*'s list were changing tax status to for-profit (taxable) from not-for-profit (tax-exempt).
The list includes full-asset mergers, acquisitions, lease agreements, joint ventures and partnerships of various forms in which control or a significant equity stake in a hospital changed hands. In addition, many hospitals, including Catholic facilities, acquired hospitals through what religious and some academic institutions refer to as "sponsorships."
However, the corporate and state-by-state listings don't include management contracts. They also don't include affiliations, such as when a hospital joins a network. The list also excludes deals that were pending from 1995 or announced in 1996 but fell through this year.
Merger definitions are included in the list if they're available.