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Proposed hospital mega-deals put pressure on CHS, Tenet and HCA

Proposed mergers between some of the nation's largest nonprofit health systems are putting pressure on for-profit hospital operators, according to Forbes.

Looking to grow their brands and improve care, major Catholic-owned hospital operators have recently announced, or are reportedly in, merger talks. Englewood, Colo.-based Catholic Health Initiatives and San Francisco-based Dignity Health signed a definitive agreement Dec. 7 to combine into a single Catholic health system comprising 139 hospitals across 28 states. Just a few days later, The Wall Street Journal reported St. Louis-based Ascension and Renton, Wash.-based Providence St. Joseph Health are in merger talks. The combination of the two Catholic institutions would create the largest hospital operator in the nation, with 191 hospitals across 27 states.

The 330 hospitals involved in these deals leave fewer acquisition targets for for-profit hospital operators like Nashville, Tenn.-based HCA Healthcare, Dallas-based Tenet Healthcare and Franklin, Tenn.-based Community Health Systems. The nonprofit systems are trying to expand their reach as major for-profit hospital operators are scaling back and facing financial challenges, according to Forbes.

Tenet ended the third quarter of this year with a net loss of $367 million on revenues of $4.59 billion. That's compared to the same period of 2016, when the company recorded a net loss of $8 million on revenues of $4.85 billion. CHS ended the third quarter of 2017 with a net loss of $110 million, compared to a net loss of $79 million in the same period of the year prior.

Although HCA's net income declined in the third quarter, it may be positioning itself to better compete with the growing nonprofit health systems. While Tenet and CHS are trying to divest underperforming hospitals, HCA is focused on growth.

"HCA has resumed a focus on accretive consolidation, particularly as more troubled hospital providers such as [Community Health Systems] are putting assets up for sale," Ana Gupte, an analyst at Leerink Partners, told Forbes.

More articles on healthcare industry transactions:

5 biggest healthcare deals of all time
Ascension to sell its stake in Grand Cayman hospital: 4 things to know
Advocate, Aurora Health Care to merge into $11B health system: 5 things to know

 

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