Hospital megachain
This week, US hospital chain Community Health announced it would buy rival chain Triad Hospitals in a deal totaling $6.8 billion. Community Health beat out a private equity bid. The deal will create the largest publicly=owned US hospital chain with 130 hospitals in 29 states.
The current #1 is Tenet Healthcare. The #1 chain overall, Hospital Management Associates, was taken private in 2006. Another major competitor is Lifepoint Hospitals, spun off from HCA in 1999, and which bought smaller chain Province Healthcare in 2004.
As a Wall Street Journal article ("Community Health to Acquire Rival Triad," 3/20/070 noted, "The deal underscores how high debt loads and flat reimbursement rates are driving consolidation in the hospital sector."
Both companies have specialized in smaller hospitals: Community Health in rural areas, and Triad those in small cities. That means they are often have local monopolies.
Many analysts call the acquisition a mistake, pointing out that Community Health paid too much. And, truth to tell, the future looks bleak for most hospitals as demand goes up with an aging population and payments (both through insurers and Government programs) goes down. At least some observers are thinking that Community may be betting on some form of universal health insurance coming in the next few years. A development that may help hospitals at least avoid the liability from uninsured patients.
There will not be much in the ways of economies of scale, but a bigger hospital chain should at least have a little more bargaining power with private insurers and may be able to get a seat at the table whenfederal health insurance plans are drawb up.
