Several hospitals seek buyers or mergers to strengthen their bottom lines

The Boston Globe: Massachusetts officials are holding public comment sessions on a proposed sale of chain of hospitals in the state, and "scores of local officials, state representatives, community leaders, and employees and retirees of Caritas hospitals in Eastern Massachusetts have paraded to the podium to praise Caritas management and the private equity firm, Cerberus Capital Management, that has pledged to preserve the chain of six hospitals, at least for three years." The sale has raised questions about what might happen if Cerberus decides to sell the hospitals at a later date and the effect of moving a nonprofit, Catholic hospital chain into a for-profit operation. "Caritas officials, led by chief executive Ralph de la Torre, argued the financially struggling hospital chain needs a cash-rich partner. … Cerberus' commitment to preserve jobs, honor labor contracts, pay taxes, fund employee pensions, and funnel $100 million into capital improvements at the six financially-struggling hospitals appears to have headed off potential opposition from organized labor and community leaders who initially expressed skepticism about the deal, the largest private equity investment in the state's health care industry" (Weisman and Woolhouse, 6/23). 

Knoxville News Sentinel: "Two months after Mercy Health Partners put its Blount Avenue hospital campus up for sale, the health system said Tuesday its 7-year-old, $65 million medical center on Parkside Drive also may be looking for a buyer. ... While it could take several months to determine if selling the campus is the right move, Mercy officials don't have to look far for an interested buyer. Covenant Health, Knoxville's largest hospital operator, has expressed a desire to acquire the hospital formerly known as Baptist Hospital West. ... Mercy officials said health care reform prompted the health system's board to consider a sale as it has accelerated the move from inpatient care to outpatient services." In addition, officials said, the hospital has not generated the kind of business it needs to make it financially successful (Harrington, 6/23).

Albany Business Review: "After 17 months of discussions, the heads of St. Peter's Health Care Services, Northeast Health and Seton Health have signed a formal merger agreement. The binding pact paves the way for the three organizations to move forward in planning for the formation of a single health care system to serve the Albany, New York region. The new, nonprofit organization, which has not yet been given a name, is expected to begin operating at the end of the year after all required regulatory approvals are in place. … The new organization will have five subsidiary hospitals—Albany Memorial, Samaritan, St. Mary's, St. Peter's and Sunnyview Rehabilitation—and 12,000 employees in 125 locations." An official said "the merger, which was first announced in February 2009, will help the hospitals—all of which are currently profitable—to withstand the changes taking place in health care and the 'continuous state cuts' in funding for the industry" (Pinkney, 6/22).

Modern HealthCare: Meanwhile, on the payment front, "[r]ecovery audit contractors denied $2.47 million in Medicare claims to 437 hospitals in the first quarter of 2010, the American Hospital Association announced. In the first results of its RACTrac survey, a quarterly poll designed by the AHA to track and summarize the RAC program's impact, the AHA determined that the RAC contractors were engaging primarily in complex reviews, which use human review of medical records and other medical documentation to identify improper payments to providers. … The Recovery Audit Contractor, or RAC, program allows third-party auditors hired by the CMS to keep 9% to 12.5% of payments they identify as improper and collect from providers. Currently, it only audits payments made in Medicare's fee-for-service program" (Lubell, 6/22).

The Associated Press/BusinessWeek: "Shares of major health insurers fell modestly Tuesday, as investors digested a White House explanation of how several elements of health care reform will unfold later this year. Shares of companies like WellPoint Inc. and UnitedHealth Group Inc. posted frequent wide swings last year at least partially due to the latest word out of Washington, where Congress was engaged in an intense debate over a reform bill that was ultimately passed in March. On Tuesday, President Barack Obama, Health and Human Services Secretary Kathleen Sebelius and other administration officials marked the first 90 days since the bill's passage by talking up several elements that will start for most health plans renewing on or after September 23. … Health care stocks showed little reaction" (Murphy, 6/22).

The Wall Street Journal: "A recent hospital sector selloff appears to have ended, although stocks haven't rallied much as investors apparently nurse concerns about patient volume trends and lawmakers' failure to approve several measures considered helpful to the industry. Hospital shares were mixed around noon Tuesday, with some down slightly and others up 1% to 2%, remaining down from their levels a week earlier. The stocks dipped significantly Monday, although they had been slipping since the middle of last week. The Standard & Poor's 500 health-care facilities index earlier in the day was down 8.5% over the past week. ... Shares traded below their average long-term valuations for price to projected earnings for the next 12 months. Fueling investor uneasiness in part was Congress's recent failure to approve an extension through June 2011 of increased federal Medicaid matching subsidies to states, currently set to expire at the end of this year. Hospital investors also were looking for lawmakers to extend a federal subsidy for Cobra insurance for those who lose their jobs, and to fix a 21% Medicare fee cut for physicians" (Brin, 6/22).