A profile of recent hospital acquisitions

The hospital industry has experienced growing consolidation in the past twenty years. Since 2010, there has been a significant increase in hospital acquisitions. There is limited empirical study of hospital acquisitions in the last decade, and the popular press has suggested that acquisitions have accelerated in recent years due in part to federal health reform. This paper reports on a study undertaken to identify the market, management and financial factors of acquired acute care, community hospitals in the U.S. with more than 25 beds during the period January 2010 to March 2012. Using data provided by Modern Healthcare, we excluded acquisitions of specialty and critical access hospitals, and identified 77 community hospitals acquired during this study period. We also used data from the Area Resource File and the Hospital Cost Reporting Information System from the Centers for Medicare and Medicaid Services to examine market and organizational data for study hospitals. Our analysis compared acquired hospitals to non-acquired hospitals. Study findings showed that acquired hospitals were located in markets with lower rates of PPO penetration compared to non—acquired hospitals. Occupancy rate was found to be inversely related to acquisition, however, case mix index was significantly and positively related to a hospital being acquired. Financial factors negatively associated with a hospital being acquired include age of plant and cash flow margin. In comparison to findings from earlier studies of hospital acquisitions, study results show different factors associated with acquisitions, and suggest hospital acquisition strategies that reflect responses to national health reform legislation.