Tenet Healthcare's chief executive officer says the market is ripe for hospital acquisitions and smaller health systems will likely close or cut services due to the current environment, Bloomberg News reported.
The Dallas-based Tenet owns 77 hospitals throughout the country, making it the nation's third-largest hospital operator.
Hospital chain CEO Trevor Fetter, in an interview with Bloomberg, indicated that the tough operating environment all but beckons consolidation. "This business has gotten tougher and tougher," Fetter told the wire service. "We can do that across this vast portfolio. I can't imagine if you're trying to run a mid-sized, independent hospital how you figure this out."
According to Fetter, Tenet is currently seeking hospitals adjacent to its current market or facilities that are among the top two in their specific city or region. The company's most recent acquisition was 28-hospital Vanguard Health Systems for $1.8 billion earlier this year.
Fetter also noted that the difficult rollout of the Affordable Care Act has led to some concern among hospital operators that they won't get some financial relief due to the uncompensated care they provide patients.
"This is a much rougher process than we had anticipated," Fetter told Bloomberg.
Fetter's remarks seem to contradict comments he made to CNBC last month, when he said Tenet was seeking to expand operations in states with large numbers of uninsured, including Texas, Florida and California. Only the latter state has agreed to expand its Medicaid program under the auspices of the Affordable Care Act.
Tenet is well positioned to financially benefit from the current healthcare finance structure, according to Barron's, which noted that its relatively low operating costs give it a good opportunity to capture new business from the state health insurance exchanges. Payers participating in the exchange tend to put their networks together based on the prices offered by providers. As a result, analysts have been bullish on the company's stock.
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