To Jack Bovender Jr., the only thing that changed when investors completed their $33 billion leveraged buyout of HCA was that the companys shares will no longer be traded on the New York Stock Exchange. Otherwise, life will be largely the same for the largest nongovernmental operator of hospitals in the country.
Bovender, chairman and chief executive officer of HCA, said the new owners of HCA understand that the companys hospitals can deliver significant profits so long as theyre patient enough to wait five to seven years. Like other members of management, Bovender is among the new owners, along with private equity firms Bain Capital, Kohlberg Kravis Roberts & Co. and Merrill Lynch Global Private Equity along with co-founder Thomas Frist Jr. and some of his family members.
It sounds ironic and counterintuitive, but I think private equity is more patient than public equity, Bovender said after shareholders approved the deal in a special meeting at the companys Nashville headquarters. Stock analysts were too caught up in the tough operating environment for acute-care hospitalsparticularly in relation to bad debts and slower growth in patient volumeto see the long-term value, the intrinsic value of HCAs assets, he said.
HCA wont change its operations, capital expenditures or management team as a result of closing the deal on Nov. 17, Bovender emphasized. Like the last time HCA went private, in 1989, hospital companies are out of favor with stock market investors, said Vic Campbell, HCA senior vice president. Unlike that deal, Campbell said, this latest transaction does not require the company to sell assets or restrict its capital expenditures, which will continue to be around $1.5 billion per year for the next five years.
HCAs strategy is still the same: The aging of the population will drive up the demand for hospital services, and HCA will position itself to provide those services in fast-growing markets, Bovender said. He acknowledged that for-profit hospital companies have been predicting that growth for more than five years, despite uneven growth in patient volume the past two or three years. Many companies have pointed to changes in health plans requiring greater copayments and deductibles for that uneven performance.
Technological advances are making a dent in that demand, too, Bovender said, but they wont eliminate it as the population ages. Quite frankly, he said, theres no way that you escape that.