With their principal nemesis, Columbia/HCA Healthcare Corp., a shell of its former self, and with increasing consolidation of healthcare, the stage is set for a whirlwind of activity among not-for-profits.
Look for the not-for-profit systems to stay with their aggressive course, always jockeying for better position in the constantly changing healthcare climate. Time will tell how it works.
But they've got the money to make things happen.
According to Moody's Investors Service in New York, multistate not-for-profit systems had a median of about $450 million to spend on acquisitions in 1996, more than double the cash they had on hand in 1992.
As just one small example, VHA, the nation's largest alliance of not-for-profit hospitals, already has the feelers out. It's starting Community Health Corp., a new not-for-profit company whose aim is to acquire hospitals in Texas and New Mexico when they flirt with turning for-profit.
The company is said to have accessed $20 million to buy, lease or manage hospitals, but it could leverage as much as $150 million or more to carry out its mission.
All that activity means consolidation in the not-for-profit sector will continue. It will be the way to survive tighter payment rules in managed care and changes in Medicare and Medicaid.
As always, freestanding hospitals will be on the outlook for partners to take advantage of the economies of scale.
While some will go the traditional route of mergers and acquisitions, looser affiliations such as managed-care contracting and purchasing relationships will be popular, according to a recent study.
The study, by TriBrook/AM&G, a Westmont, Ill., consulting firm, found that 58% of hospitals plan to have affiliations with systems or networks by 2002, up from just 14% that have such links now. The survey found money was usually the motivating factor behind these deals.
The study surveyed 106 hospitals, and 95% of the respondents were not-for-profits, either public or private.
Four Roman Catholic hospitals on New York's Long Island followed the path to consolidation late last year when they joined to form a single health system with one governing board. The idea behind the link was to eliminate duplication and operate more efficiently. The four hospitals, which are all sponsored by the Rockville Centre Diocese, will have combined revenues of more than $800 million.
The hospitals involved are 247-bed St. Francis Hospital-The Heart Center, Roslyn; 387-bed Mercy Medical Center, Rockville Centre; 235-bed St. Charles Hospital and Rehabilitation Center, Port Jefferson; and 525-bed Good Samaritan Hospital Medical Center, West Islip.
Although that deal wasn't considered a merger because all four are sponsored by a single diocese, not-for-profit system deals likely will see some leniency in antitrust cases.
In some recent cases that have gone to court, federal judges have acknowledged not-for-profit ownership as a good thing.
While the government argues that not-for-profit status doesn't guarantee a limit on prices, the tax-exempt defense is getting a favorable airing in court.
In a recent antitrust case involving two Long Island hospital systems, a federal court judge said their tax-exempt status would help them avoid anti-competitive behavior (Nov. 10, 1997, p. 17).
Not-for-profits also will see victories in challenges to their property-tax exemptions.
Pennsylvania is helping to lead the way with new legislation that clarifies the criteria hospitals must meet for tax-exempt status, such as levels of uncompensated care.
All in all, 1998 could be a year when the not-for-profits outshine the for-profits when it comes to business activity.