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Anne Law

Hospitals still merging at frenzied pace

by Anne Law | Dun & Bradstreet Editor

October 4, 2011 | No Comments »

Announcements of consolidation deals in the hospital industry seem to be never-ending as of late, as the domino effect of economic troubles and health reform uncertainties continues to tilt health care providers towards the philosophy that there is strength and security in numbers.

Several transactions have closed in the last few days, including Health Management Associatespurchase of Mercy Health Partners Tennessee (now Tennova Healthcare), which operates seven medical centers near Knoxville, from Catholic Health Partners.

The multi-state Iowa Health System network added a new facility in Illinois on Monday when it affiliated with Methodist Medical Center in Peoria, the same day that Steward Health closed two facility acquisitions in Massachusetts.

Also this week Community Health Systems closed its acquisition of Tomball Regional near Houston, while Duke LifePoint Healthcare (a JV between Duke University Health System and LifePoint Hospitals) announced its completed purchase of North Carolina’s Person Memorial Hospital.

Pending deals include a merger between the Yale-New Haven and Saint Raphael hospitals in Connecticut, OSF Healthcare’s agreement to purchase Rockford Health System in Illinois, and a three-way merger in Kentucky between the University of Louisville Hospital, St. Joseph Health, and Jewish Hospital & St. Mary’s Healthcare. The list goes on and on.

While many recent announcements involve troubled community hospitals struggling to survive on their own, small to midsized hospital networks are not immune to market pressures and are seeking alliances as well. There have also been a number of deals struck among other care providers such as specialty clinics, dialysis centers, laboratories, and emergency room operators.

These hospital organizations are in part choosing to team up to meet federal guidelines (and receive funding) for forming accountable care organizations and enacting electronic health record (EHR) systems, both of which aim to increase efficiencies and help lower the skyrocketing cost of medical care in the US.

But regardless of how the implementation of health reform plays out over the next few years, it is apparent that hospitals will continue to pursue mergers and affiliations at a rapid rate this year as they face more immediate factors including high unemployment rates (and thus uninsured patient rates), changes in Medicare/Medicaid reimbursement levels, increased competition among regional providers, and the rising need for capital improvements to aging hospital facilities.

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