HCA once again leveraged its sheer size and organic growth strategy to maintain its position as the largest for-profit hospital chain in the country, according to Modern Healthcare's latest By the Numbers list.
The Nashville-based system reported total operating revenue of $36.9 billion for fiscal 2014, almost twice as much as second-ranked Community Health Systems' $18.6 billion. HCA's strategy of not buying regional hospital chains but instead filling out existing markets has continued to work, experts say.
“The market cares more about organic growth,” said Darren Lehrich, managing director at Deutsche Bank, a New York City-based investment banking firm. “HCA would love to be more acquisitive. Nothing big has come along to fit their criteria.”
HCA's last large deal was its purchase of Kansas City, Mo.-based Health Midwest (now HCA Midwest) in 2003, he said. Last year, the company tried to purchase two more hospitals in Kansas City from Ascension Health, but those deals were shot down by the Federal Trade Commission. Most of HCA's mergers and acquisitions have been of the tuck-in variety, Lehrich said.
While HCA topped the ranking in operating revenue, its 8% revenue growth was slower than other companies. Dallas-based Tenet Healthcare Corp. ranked third in operating revenue at $16.6 billion, leading all hospital companies with almost 50% revenue growth over 2013. Community Health Systems, based in Franklin, Tenn., ranked second with $18.6 billion in operating revenue, increasing its revenue by 45.4% over 2013.
Tenet acquired Vanguard Health Systems for $4.3 billion in 2013, and Community bought Health Management Associates for $3.9 billion in 2014. Those were transformative acquisitions that led to accelerated growth, Lehrich said.
Although Tenet and Community won't repeat the gains they made in 2014, overall growth trends in 2015 will remain positive in the for-profit hospital system space, he said.