Expect more acquisitions, joint ventures and health plan expansion from U.S. hospitals this year. Some of the largest U.S. hospital operators joined pharmaceutical and biotechnology companies in San Francisco to pitch investors and analysts on their operations and strategy. Growth—through deals and investment—is central to many hospital-system strategies, executives said Monday at the JP Morgan Healthcare Conference.
Hospital executives spoke eagerly about their desire to expand but were guarded about divulging details.
HCA plans to keep focusing on existing markets. The system, which includes 166 hospitals, is seeking hospital acquisitions that “make our networks stronger,” said Samuel Hazen, chief operating officer for the Nashville-based company.
The investor-owned chain is also looking beyond hospitals to deals that will expand its outpatient business. In November, HCA acquired 14 Nevada urgent care centers, bringing the total number of urgent care centers the company owns to 65. Recent ambulatory deals “completely solidified” HCA's strategic position in some markets, Hazen said.
Dignity Health, a San Francisco-based health system with operations in 21 states, including 39 hospitals in Arizona, California and Nevada, is “moving ahead again with a very assertive growth strategy,” said Charlie Francis, the system's chief strategy officer.
This comes after three years in which system made investments to prepare for expansion. “We were silent in terms of any discussion with other integrated delivery networks across the country,” he said. “Now, we are in several conversations with others about alignment.”
Partners HealthCare in Boston would also like to grow its health system, but don't expected any hospital acquisitions.
Instead, Partners will look to physician deals for expansion. “If we can't do hospitals, we still would like to organically grow with physicians,” said Peter Markell, CFO for the system. That could include acquisitions or affiliations. “We're trying to be flexible.”
Partners acquired Harbor Medial Associates, a medical group with 70 doctors last year, though the deal met with criticism from the state attorney general.
In a conference dominated by for-profit companies, Markell said that mergers and acquisitions among not-for-profits face different negotiations when coming to terms. “You can't go make a hostile tender offer,” he said. “You have to be offering somebody something they want and they have to be bringing something to you that you value. Those are tougher deals to strike.”
Partners HealthCare is also looking to grow its health plan by gaining more commercial business from individual consumers and small businesses, Markell said. Commercial business accounts for 30% of its health plan operations and executives would like that to increase to 40% or more, he said.
Dallas-based Baylor Scott & White, meanwhile, plans to expand its reach across Texas with the help of its health plan. The health plan is seeking state approval to do business in another 16 counties.
“We are a growth company,” Baylor Scott & White CEO Joel Allison said. “We want to continue to grow. We are going to create a statewide network." That could mean acquisitions, contractual agreements and expansion of its accountable care organization, he said.
At least one health system said it has no ambition to expand into new markets: Intermountain Healthcare, which is headquartered in Salt Lake City and operates 22 hospitals. “One thing that isn't on this list is expanding geographically,” said Intermountain CEO Charles Sorenson. “The best way for Intermountain to grow is to grow in capability.”