Standalone hospitals under financial duress

Although many hospital networks are thriving in Georgia, standalone facilities are having far from a peachy time and will likely be targets of consolidation, reports The Atlanta Journal-Constitution.

According to a survey by the newspaper, 40 percent of Georgia's standalone hospitals are losing money, and are likely to come under more pressure given the cost-cutting mandates of federal healthcare reform. The numbers are similar in other parts of the country such as California, where few standalone facilities eke out profit margins of above 5 percent.

By contrast, Georgia's networked facilities are enjoying prosperous times. The Piedmont Hospital system reported its strongest profit margin in a decade for 2010, while WellStar Health System's 2010 margins were double what they were in 2007--at the start of the Great Recession.

Industry observers say the strong financial system of networks such as Piedmont and WellStar make it likely they will seek out independent players as acquisition targets in the near term. Among the likeliest acquisitions is Southern Regional Medical Center near Atlanta, which while cutting its red ink in recent years has debt rated at junk bond status.

"There is a strong move toward consolidation here in Georgia," said Holly Lang, director of the Hospital Accountability Project at Georgia Watch. "It can be both a positive and a negative thing. It depends on how the hospitals go about this and whether they consider the patients in what they are doing."

For more:
- read The Atlanta Journal-Constitution article
- read the Advisory Board article on Atlanta hospital construction