The healthcare industry will continue its unprecedented trend toward consolidation in 2015, according to a new report from Moody's Investors Service.
Healthcare will see a large number of mergers and acquisitions, joint ventures and affiliations this year, Moody's Healthcare Quarterly reports. While mergers and acquisitions are considered credit negative for the acquiring organization, Moody's reports that a hospital or health system joining a larger, more successful system to alleviate financial woes could be considered a credit positive. Mid-sized hospital operators such as LifePoint will look to expand into new markets this year, according to the report.
"The larger, for-profit operators HCA [Hospital Corporation of America], Tenet and Community are likely to continue looking for targets that fill out existing markets or provide opportunities to enter new ones," Moody's said in an announcement. "Hospitals in general will continue to benefit from a reduction in the number of patients without health insurance as the Affordable Care Act [ACA] continues to gain traction."
Barry Ronan, president and CEO of Western Maryland Health System, last week echoed predictions of increased consolidation in an interview with FierceHealthcare. Ronan specifically predicted forms of consolidation that allowed small- to mid-sized systems to maintain their independence. "I'm hearing more and more interest in strategic regional organizations and alliances, and I expect a greater momentum during 2015," he said.
In addition to continued consolidation, the year will also bring several challenges and opportunities for both nonprofit and for-profit hospitals and health systems. For example, the continued implementation of the ACA will increase the number of insured patients seeking care at hospitals. However, Moody's projects weak patient volume growth in 2015. This slow growth traces back to several factors, including changes in reimbursement and regulatory frameworks and the increased proliferation of high-deductible health insurance plans.