HCA in the hunt for a big purchase

HCA, about to lose its spot as the largest for-profit hospital chain in the country, is open to growing through a big purchase, but finding the right potential partner remains a challenge, President and CEO Milton Johnson said at the JPMorgan Healthcare Conference in San Francisco.

“We would love to be more acquisitive,” Johnson said. “We certainly will be pursuing those (large M&A opportunities) and looking for those.”

If Community Health Systems closes its acquisition of Health Management Associates this month as expected, the chain will overtake HCA as the largest by hospital count in the country. And Tenet Healthcare Corp., which has an urban focus like HCA, is currently integrating Vanguard Health Systems' hospitals into its portfolio.

The right target for HCA will most likely be a not-for-profit system, but it's harder to predict which ones will come to market, Johnson said. Often a system will start a sales process, only to halt it because of community pressure or internal politics.

Joint ventures that HCA has pursued in markets like Austin, Texas, San Antonio and Denver present another potential model for growth, he said.

Before its presentation, HCA disclosed that it will report growth in earnings before interest, taxes, depreciation and amortization that will be $65 million to $75 million above the high end of its preview guidance.

In the past year, it has primarily pursued “tuck in” acquisitions, leaving cash on its balance sheet for a large buy.

HCA is not the only chain with cash burning a hole in its pocket. Another investor-owned group looking for takeover targets is private equity-backed Iasis Healthcare.

After divesting three hospitals in Florida to HCA, Iasis now has $400 million on its balance sheet that can be used for buys, President and CEO Carl Whitmer said at the conference. Acquisitions will be used to add hospitals as well as increase access points for patients on the outpatient side, he added.

Follow Beth Kutscher on Twitter: @MHbkutscher