Over the past few years, there have been headwinds with two of the largest for-profit chains, substantial success for HCA — one of the two largest for-profit hospital operators — and significant growth in two of the private equity-funded hospital chains.
1. Starting with PE-funded chains, each Steward HealthCare (funded by Cerberus Capital Management) and RegionalCare Hospital Partners (funded by Apollo Apollo Global Management) have grown a great deal. Steward has bought into additional markets with its acquisition of IASIS Healthcare in September 2017, while RegionalCare bought Capella Healthcare in May 2016.
2. A terrific story in the WSJ, titled "PE Firms Shy Away from Tradional Hospital Deals, Despite Sector's Size," sheds great light on PEs' waning interest in large hospital deals (Amy Or, Jan. 27, 2016).
3. Another WSJ article, titled "Flurry of Health-Care Deals Reflects Shift Away From Hospitals," also highlights the increased interest of all kinds of health care investors in areas outside of traditional hospitals (Anna Wilde Mathews and Melanie Evans, Dec. 20, 2017).
4. As Community Health Systems and Tenet Healthcare have struggled over the last few years, each has used the strategy of selling off hospitals rather than wholesale acquisitions of the companies by private equity to pay down debt or go private.
5. Hospital operators that have excelled over the last few years have largely relied on dominant local market positions versus simply a great number of hospitals in total. CHS and Tenet had widely held assets and struggled. CHS both expanded and acquired Health Management Associates in 2013, and it has struggled since. HCA, in contrast, has great regionally and locally dominant positions and has done relatively well.
6. There seems to be stronger PE interest in regionally strong operators and operators that can partially dominate a market than national behemoth operators.