Two looming hospital system mergers will create the largest health systems in the country.
I assume most of you have heard about the two potential not-for-profit hospital system mergers that will create the largest systems in the country, larger than even HCA, the biggest for-profit hospital company. In one way, this bothers me because with one of them, the combined entity will have 191 hospitals, plus all the ancillary businesses. I just don’t understand how that can be run efficiently.
The for-profit chains did their own large mergers, and a few of them are suffering the results and shedding hospitals to pay down debt. But there is one big difference with not-for-profit mergers, and that is capital structure. They do not take on any new debt to complete the merger or “acquisition,” unlike on the for-profit side. So, bigger, yes, but financially riskier? No.
Especially when change is in the air, whether reimbursement, labor costs or overbuilding, a company’s capital structure will be key not only to its success, but to its survival. The seniors housing and care industry needs to be reminded of this from time to time.
