When it comes to provider consolidation, 2016 may well be remembered as the great unraveling.
Some of the nation's largest investor-owned hospital systems are in full retreat as they look to reduce debt burdens taken on during the past decade's merger-and-acquisition binge. Even some large not-for-profit systems are suffering from indigestion—witness the ongoing merger talks between Dignity Health and Catholic Health Initiatives, driven in large part by the latter system's unsustainable debt load from its acquisition spree.
The giant investor-owned hospital companies such as HCA Holdings, Community Health Systems and Tenet Healthcare Corp. are either selling hospitals or largely staying on the sidelines. Meanwhile, it's regional not-for-profits such as MultiCare Health System in Tacoma, Wash., and WellStar Health System in metropolitan Atlanta that are buying the hospitals that the for-profits don't want anymore.
These deals “are deeply strategic,” said Fitch Ratings Managing Partner Megan Neuburger.
The regional not-for-profits are looking to grow and, perhaps, gain a statewide footprint to better manage populations and to achieve economies of scale and more leverage negotiating with insurers, Neuburger said. That's perceptibly different from even two or three years ago when it was OK to add hospitals for the sake of boosting revenue and earnings, she said.