How HMA Finds Itself at the Center of the Hospital Universe

Anyone who has monitored the hospital industry over the past several months has consistently seen one company in the headlines: HMA.

Naples, Fla.-based, investor-owned Health Management Associates has been front and center for two main reasons. In July, it agreed to merge with its competitor, Franklin, Tenn.-based Community Health Systems, in a deal valued at $7.6 billion. That's a huge chunk of change, but it's nothing new for CHS, which acquired Triad Hospitals in 2007 for $6.8 billion.

The CHS-HMA merger was gigantic news, mostly because it would create the largest for-profit hospital chain in the country. In fact, it would be the largest health system, period. But the spotlight initially grew bright on HMA in May when it began sparring with its primary shareholder, New York City-based hedge fund Glenview Capital Management.

The feud has played out like a soap opera (as much as there can be in the hospital world): Glenview tried to acquire a vast majority of HMA; HMA didn't like that and consequently approved a poison pill to protect itself; Glenview has since gone on a crusade, trying to replace the entire HMA board with eight people of its own through a shareholder vote (in the always fun-filled financial jargon, this is a "consent solicitation"); Glenview even took shots at HMA's board and executive leadership, saying HMA has utterly failed both financially and strategically; HMA tried to meet Glenview halfway by joining its board with Glenview's proposed board, to which Glenview metaphorically said "lol, please."

And now, a little more than a week ago, Glenview prevailed. HMA shareholders jumped aboard Glenview's plan, and HMA now has a new board of directors while the predecessors look for work. I'm convinced daytime cable would pick these episodes up.

Because of all this, HMA finds itself at the center of the hospital universe. It's easy to say this is merely a dance among three big, Wall Street-backed organizations, but there is much more to this. If the merger between HMA and CHS is approved, which is likely, it will affect hundreds of rural and medium-sized communities across the country as CHS enters several markets it had not previously touched. Studies have shown acquisitions by national chains lead to more profitable hospitals, but at what cost?

Glenview is the common denominator in all of this. Not only does it own 14.6 percent of HMA, but it also owns roughly 10 percent of CHS…and also has significant stock in the three other largest for-profit hospital companies (Nashville, Tenn.-based Hospital Corp. of America, Dallas-based Tenet Healthcare Corp. and Brentwood, Tenn.-based LifePoint Hospitals). Glenview, potentially, has the most to gain and lose from this transaction.

Acquisitions and financial battles are two foundational situations for investor-owned health systems, and HMA landed in massive versions of both at the same time. Will all of this be swept under the rug of healthcare history with nary a speed bump, or will healthcare experts look back at this state of affairs and wonder, "What went wrong with this company formerly known as HMA? And was this good for healthcare?"

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