Amid a surge of consolidation in healthcare as the industry responds to healthcare reform, a hospital deal that broke down this week underscores the premium on size, market leverage and geographic reach.
Ascension Health, the nation's largest private not-for-profit health system, and the Daughters of Charity, a struggling six-hospital system in Los Altos Hills, Calif., announced they had ended acquisition talks. Instead, the Daughters of Charity, which first opened a California hospital in 1856, would seek buyers interested in one or more of the system's hospitals.
The deal failed because the Daughters of Charity lacks market heft.
The Daughters of Charity's half-dozen hospitals are scattered across three markets. As Robert Issai, the system's CEO, put it in an interview with Modern Healthcare, they lack the “essentiality,” or market presence, that would make them a viable target for Ascension.
Hospitals, systems and physician groups have said that provisions of the Patient Protection and Affordable Care Act that encourage coordinated care and managing population health, as well as parallel imperatives from private payers, are making it crucial for providers to increase their scale through mergers and alliances.