Who Will Survive Hospital Consolidation

Healthcare providers are under pressure on a variety of fronts.  Patients demand extensive care regardless of cost.  Payers both public and private are struggling to reduce costs, and the resulting billing struggles result in high administrative overhead.  Staffing is in short supply, resulting in high overtime and temporary staffing costs.  New technology and equipment require large capital expenditures that many facilities cannot afford.  Pharma and medical device manufacturers get a much bigger share of the healthcare profit pie.

The situation is even worse for hospitals in particular.  They’re overwhelmingly complex organizations, and as a result they’re difficult to manage.  They also have high fixed costs, and there is often over-capacity in specific geographical markets, leading to intense competition.  From a Porter’s Five Forces perspective, most of the puzzle pieces look pretty bad. Continue reading Who Will Survive Hospital Consolidation?

What Can HCA Tell Us About the Healthcare Sector?

When HCA Inc. was acquired in 2006 by a private equity consortium including Bain Capital, KKR, and Merrill Lynch (now of course Bank of America), it was the biggest leveraged buyout in history.  For that reason, the announcement a couple of weeks ago that HCA was pricing its IPO at around $3.7 billion piqued my interest.  The company is the largest private healthcare provider in the US, providing 4-5% of all hospital services with 156 hospitals, not to mention 97 freestanding surgical centers.  Just because of HCA’s sheer size and influence on management practices, it is an interesting company to analyze a bit more closely to understand trends in the US healthcare sector. Continue reading What Can HCA Tell Us About the Healthcare Sector?