Opportunity knocks, even for healthcare's least likely buyers: public hospital systems.
In a string of Sunbelt acquisitions unveiled since Aug. 31, four public systems in Florida and North Carolina have bought five hospitals, including four sold by for-profit giants HCA, Nashville, and Tenet Healthcare Corp., Dallas.
The buyers -- Carolinas HealthCare System, Charlotte, N.C.; Jackson Health System, Miami; Lee Memorial Health System, Fort Myers, Fla.; and Memorial Healthcare System, Hollywood, Fla. -- inked the deals worth a combined $417 million over the past two months in a buying spree that is uncharacteristic for the public sector.
The deals underscore an effort by public hospitals -- which frequently serve as the primary safety net for the nation's rising number of uninsured and underinsured -- to adapt to market pressure and healthcare's capital-heavy demands.
"It's surprising," said Stephen Zuckerman, an economist who studies public and safety-net healthcare at the Urban Institute, a public policy not-for-profit. Public healthcare has made roughly 3% of acquisition deals since 2001, according to merger and acquisition activity compiled by Irving Levin Associates. For-profit buyers dominated the market, with a little more than 60% of acquisitions announced during the first half of the decade.
In addition, locally and state-owned hospitals have lost ground to private and for-profit competitors over the past three decades. Public facilities made up 30% of U.S. hospitals 30 years ago. But closures, mergers and acquisitions, and a wave of privatization during the '90s steadily eroded their numbers.
In 2005, the most recent year for which figures are available from the American Hospital Association, public hospitals made up 22% of the market. Meanwhile, investor-owned facilities surged from 1% of U.S. hospitals in 1975 to 18% last year.
Indeed, public health system executives involved in recent deals cited market pressure as a driving reason for the deals. Outside experts noted no industrywide trend to emerge from the buying binge. The crush of deals, though unusual, appeared to be strategic acquisitions by competitive players, they said.