Hospitals, health systems see mergers as path to survival

Since 2005, 183 rural hospitals across 36 states have closed, leaving many people in those communities without timely access to essential medical services and often leading to a decline in the number of healthcare providers in those counties.

This year alone, 19 hospitals have closed or filed for bankruptcy due to the increasing financial issues they continue to battle, including declining inpatient volumes, decreasing reimbursements and the continued effects of the pandemic.

As a result, many hospitals vulnerable to closure or bankruptcy are looking to survive by joining larger health systems, which are also viewing potential acquisitions with more skepticism, according to Vox.

Despite the current financial climate in healthcare and a projected recession next year, many health systems are pursuing mergers and acquisitions to scale and reduce costs, provide additional care services and strengthen their footprint in certain markets. Potential deals in the works include: 

- In Louisiana, New Orleans-based LCMC Health plans to spend $150 million to acquire three Tulane University hospitals from Nashville, Tenn.-based HCA Healthcare and has committed to a $220 million investment toward improving operations at the hospitals. The organizations hope to finalize the deal by the end of 2022 or early 2023.

- Aurora, Colo.-based UCHealth and Parkview Health System signed a letter of intent to merge in October. UCHealth, a 12-hospital system, plans to invest about $200 million into Pueblo, Colo.-based Parkview under the pending deal, which is expected to be finalized in 2023. 

- Tower Health, which has had a particularly challenging year,  plans to sell Chestnut Hill Hospital in Philadelphia to Temple University Health System for $28 million. The news comes less than a year after the West Reading, Pa.-based system closed two other hospitals in the state. Tower plans to rebuild around its flagship Reading Hospital and the two other hospitals it acquired for $423 million from Franklin, Tenn.-based Community Health Systems in 2017. It also owns St. Christopher's Hospital for Children in Philadelphia in a joint venture with Drexel University.

- El Segundo, Calif.-based Pipeline Health System, which filed for Chapter 11 bankruptcy in October, has agreed to offload two Illinois hospitals to Princeton, N.J.-based Ramco Healthcare Holdings and Resilience Healthcare. Since acquiring ownership of the hospitals in 2019, Pipeline said it has invested $60 million to improve facilities, add technology and expand clinical programs. Resilience is expected to assume operations of the hospitals on Dec. 2, pending approval of a motion Pipeline submitted to a Texas bankruptcy court.

The healthcare sector could see consolidation continue at its current rate next year as many hospitals and health systems explore strategic options to maintain operations and keep their doors open. However, cross-market hospital systems may be increasingly under the microscope of the Federal Trade Commission and other regulatory bodies after a recent study found that these types of organizations can lead to anticompetitive effects between health systems.

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