Fitch expects the healthcare merger and acquisition trend to continue because key factors that are driving change will remain in place. Some of those factors include:
• Reimbursement under the Medicare and Medicaid programs will be constrained due to the weak economy and difficult fiscal conditions, according to the report.
• Supplemental funding programs are facing reductions as part of the Patient Protection and Affordable Care Act.
• Pressure on commercial and managed care insurance rates is increasing/decreasing/continuing?, which may offset losses on governmental reimbursement, according to the report.
In addition, Fitch believes a common theme shared by M&A in the non-profit healthcare sector has been financially stronger acquiring standalone hospitals or smaller health systems, such as credits — such as Edmundson, Mo.-based Ascension Health’s acquisition of Alexian Brothers Health System. For this reason, M&A activity will be driven by financial need as well as strategic considerations, and bondholders stand to benefit from several potential outcomes, according to the report. The potential outcomes include:
• Debt becomes the obligation of the acquirer through substitution of security.
• Debt is refunded by the acquirer.
• Debt remains a separate obligation of the acquired entity.
More Articles on Healthcare M&A:
Academic Medical Centers: What’s Their Role in the Consolidating Healthcare Market?
Pros and Cons of 3 Common Hospital Transaction Structures
Is Your Hospital Considering a Transaction? 4 Legal Areas You Must Address
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