In what appears to be straight out of alternative papers’ “News of the Weird” column, several private equity firms are looking to buy HCA and take it private. These are really smart people who make lots of money finding gold where others only see dross; they must see something here that I (and lots of others) don’t.
Pro, demographics favor the deal; older folks need more hospital care. Con, there is a growing recognition that end-of-life care is too expensive, and hospitals are the most expensive place to deliver this care. Expect to see a push to relocate terminal patients from hospitals to hospices and other less-intensive facilities.
Pro, hospitals’ profitability has been improving. Con, legislators and regulators are looking to reduce hospital costs.
Pro, hospitals have been investing heavily in profitable lines, e.g. cardiology and orthopedics. Con, in some areas ambulatory surgical centers partially owned by physicians (where that’s possible) have been capturing a significant number of profitable cases, leaving the hospitals to handle the more severe and less profitable patients.
The deal has passed the FTC approval process, and now is closer to reality. However, don’t expect this to be the first of many deals; the private equity community does not seem enamored with the industry, but rather sees HCA as the best bet in a troubled business.
Aug
22
I hate to say it, but the reason for taking HCA (or any company) private has more do with the potential for hiking the stock price than with the potential for hiking earnings.
The goal is not to buy HCA, hold it for 10 or 20 years, and make money on it. The goal is to buy HCA, do what you need to do to boost the share price (short-term fixes that can create the appearance of greater prosperity, including, perhaps, some creative book-keeping) –and then, in a few years, sell it back to the public.
This is what happened the first time HCA went private, and this is what is most likely to happen this time around.
If you’re interested in HCA’s early history, I wrote about it in Money-Driven Medicine: The Real Reason Health Care Costs So Much (Harper/Collins 2006)