No health reform could mean more mergers

The top three publicly traded hospital chains--Community Health Systems Inc. in Franklin, Tenn., Health Management Associates Inc. (HMA) in Naples, Fla., and LifePoint Hospitals Inc. in Brentwood, Tenn.--may become more aggressive in acquiring financially precarious medical centers weakened by the recession and unable to project an increase in patient volume without the rush of newly insured patients that health reform would bring in, reports Bloomberg.

With roughly one-third of community hospitals posting operating losses in 2008, the going price for many medical centers has plunged by as much as half in the past three years, giving well-funded for-profit chains such as HMA "increased opportunities," says Senior Vice President Robert Farnham.

Irving Levin Associates Inc. in Norwalk, Conn., identified 52 hospital mergers in 2009 vs. 60 in 2008. This year, most acquisitions should occur among nonprofit rural and urban hospitals with heavy volumes of Medicare, Medicaid, and uninsured patients, suggest industry watchers.

But it's not just the three largest chains that are making moves. Deals announced within the last week include:

• Northwestern Memorial Healthcare, the parent of Chicago-based Northwestern Memorial Hospital, has completed its acquisition of 215-bed Lake Forest (Ill.) Hospital, according to the Chicago Tribune.
• In Louisiana, Shriners Hospital and Louisiana State University Health Sciences Center-Shreveport have entered into a memorandum of understanding that could merge most hospital operations this year, reports the Shreveport Times.
• In New York, SUNY Downstate Medical Center in Crown Heights plans to acquire Long Island College Hospital from current operator Continuum Health Partners, notes the Brooklyn Report.

One bright side to all of this that could give more hospitals access to capital and alleviate financial stress is that the U.S. Department of Housing and Urban Development (HUD) has issued a proposed rule to allow hospitals to refinance existing non-Federal Housing Administration-insured loans "without requiring such refinancing to take place only in conjunction with the expenditure of funds for construction or renovation, which is the existing program requirement."

To learn more:
- read the Bloomberg article [1]
- here's the Tribune article [2]
- check out the Shreveport Times article [3]
- peruse the Brooklyn Paper article [4]
- read the proposed rule [5]

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