While the bigger for-profit chains are quiet on the acquisition front for now, two start-ups are forging ahead.
A buyers market?
For-profit start-ups press forward on acquisitions
Last week, Avanti Health System, Manhattan Beach, Calif., announced that it secured a $29.5 million credit facility from Siemens Financial Services to fund its acquisition of Houston-based HealthPlus Corp., which owned two Los Angeles-area hospitals. That deal, which was announced in February, was the companys first and included 127-bed East Los Angeles Doctors Hospital, Los Angeles, and 38-bed Memorial Hospital of Gardena (Calif.).
Meanwhile, Jackson Hospital Affiliates, an operating company of Jackson Healthcare, a staffing and information technology company based in Alpharetta, Ga., recently agreed to its first hospital deal. Jackson Hospital Affiliates confirmed that it has signed a letter of intent to buy 303-bed Sparks Regional Medical Center, Fort Smith, Ark.
It is a tough operating environment, but as a result, we think its difficult for a lot of buyers to get their hands around acquisition opportunities, said Joel Freedman, a founding partner of Avanti.
The owner-operated Avanti plans to focus on urban and suburban hospitals that have a reasonably good reimbursement environment, including solid government payers, Freedman said. The company is particularly interested in California, he addeda market that many larger for-profits have left or avoided.
For Siemens Financial, acquisition financing isnt a primary focus of the business, but the tight credit market and its deep familiarity with healthcare allow the company to step into the breach left by tax-exempt bondholders and banks, said Roland Chalons-Browne, president and CEO of Siemens Financial. With bond and bank financing less available, Siemens Financial is open for business, and not just for customers of its parent, German technology giant Siemens AG, Chalons-Browne said.
Besides the credit facility from Siemens, Avanti also completed a sale-leaseback arrangement on the hospitals real property with Asset Funding Group, a Los Angeles-based real estate buyer, Freedman said.
Gary Bell, hired last fall as president of Jackson Hospital Affiliates, sees a lot of acquisition opportunities, too, despite the tight credit markets. Bell, 61, has led acquisitions for investor-owned companies such as Health Management Associates and MedCath Corp.; the Sparks deal, if completed, would be the 52nd hospital he has acquired for companies over the years.
I feel that theres a great deal of opportunity to work with hospitals, but were all limited by the financial situation, Bell said. Were going to be very selective and work with those where we can make the greatest difference. I think the acquisition pace will pick up again in the future as it has in the past.
Jackson Hospital Affiliates is targeting hospitals in small urban and rural markets and is open to all forms of physician alignment, Bell said.
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