Big insurer deals could drive similar action among hospitals

Two huge insurer mergers announced in recent weeks have reshaped the payer market. And there is a possibility such deals could wind up impacting the hospital sector as well, Bloomberg Business has reported.

Both deals were enormous: Anthem's acquisition of Cigna for $54.2 billion and Aetna's acquisition of Humana for $37 billion. The two transactions concentrate tens of millions of additional lives under the eaves of just two payers.

As a result, hospitals may have to strategically concentrate their resources in response.

"If the insurers are going to have more leverage, hospitals have to have a bigger network," Bloomberg Intelligence analyst Jason McGorman told Bloomberg Business.

A particular area of focus may be rural facilities, which tend to have thinner margins than their urban counterparts. That could make LifePoint, which owns a significant number of rural facilities, a particularly attractive partner, according to Bloomberg Business. And it could also drive owners of primarily urban facilities to expand into rural areas.

However, there may be some obstacles toward greater hospital system consolidation, particularly potential concern among regulators. They have been keeping close tabs on such deals as late, limiting many deals to smaller systems and acquisitions of individual facilities. The Federal Trade Commission also does not hesitate to undo already completed mergers if the agency's leadership has antitrust concerns, compounding headaches for potential merger partners.

One recent example is NYU Langone Medical Center's acquisition of Lutheran Medical Center in Brooklyn, according to Crain's New York Business. There is also the pending acquisition of the Daughters of Charity Health system in California by New York-based private equity firm BlueMountain Capital Management.

"From a regulatory perspective, the easiest thing to do to consolidate something that's public would be to look at something that is in a rural area," Brian Wright, an analyst at Sterne Agee CRT told Bloomberg Business. "The ACA benefit has been more quickly realized in the urban areas, but there's more long-term opportunity for the uptake in the rural communities."

To learn more:
- read the Bloomberg Business article 
- check out the Crain's New York Business article

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