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Hospital execs still eyeing M&A opportunities

In a declining healthcare merger and acquisition market, hospital CFOs said that they are still monitoring opportunities to expand access to care but are remaining cautious.

In August, an analysis from KPMG found that healthcare merger and acquisition activity hit a three-year low. Interest rate hikes, political uncertainty and unclear valuations have complicated acquisitions. Despite the drop in the market, the analysis projected "some of those headwinds to moderate toward the end of the year, and that could begin to release long-pent-up demand."

To learn more about hospital executives' merger and acquisition strategy, Becker's reached out to health system CFOs:

Anthony Saul. CFO of Grady Health System (Atlanta): As a public hospital serving Fulton and DeKalb counties (in Georgia), the M&A activity is limited but not non-existent. We mostly work with our government agencies and other partners who want to expand within our community. So, for instance, we're expanding behavioral health partnerships with the two major counties that we serve. We are expanding our clinics in both communities and we're assessing our portfolio with two major hospitals closing in a year in the Atlanta market. We're looking at what investments make the most sense in the newly identified healthcare desert that has lost hospitals.

Brett Tande. CFO of Scripps Health (San Diego): One of [our system's] three financial priorities [is] "smart" growth, in which we mean growth that is additive to the system, not dilutive. This can be achieved a number of ways, which could include finding service lines that are complementary to the existing Scripps Health platform. But it could also involve being honest with ourselves as to what is a core competency and what is not, and determining if there is a more effective way at providing non-core services that we do not feel as though it is a core competency.

We have historically pursued these opportunities through the acquisition of organizations such as Imaging Healthcare Specialists, as well as creating partnerships with third parties through contribution of our operations in areas such as home health and behavioral health. Just as we have in the past, we will continue to evaluate all types of these opportunities, both clinical and administrative.

Cecelia Moore. CFO of Vanderbilt Medical Center (Nashville, Tenn.): We've already done some acquisitions in the past few years. We purchased some hospitals from Community Health Systems. At this point, we're always keeping our eyes and ears open in the market, but right now we felt the need to expand on campus. We just realized we've got to have the additional beds on campus to support those coronary services and we're the only ones in the region with those services. We were kind of in the period of M&A and now we are in the period of building up campus, but we are always scanning the market for opportunities.

Michael Allen. CFO of OSF HealthCare (Peoria, Ill.): OSF has never been a growth for growth's sake style health system or pursued mergers and acquisitions just to get bigger. We need to learn how to operate with the size we are now and as opportunities become clearer or needed in our markets or adjacent markets, we are willing to step in and try to find the right solution, like with what happened in the Peru, Ill. area. We have never been an aggressive acquirer. We've just been about building relationships with other health systems and other hospitals and other markets that we serve today and that sometimes feed into our bigger hospitals. When the time is right, and it makes sense for another market or another facility that is looking for a partner, [we] will start having those discussions.

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