HCA CFO: M&A Will First Focus on Outpatient Sites
The largest hospital chain in the country will in the near term steer its merger-and-acquisition efforts toward outpatient facilities, its CFO said at an investment bank conference last week.
Speaking to the 2022 Global Healthcare Conference hosted by RBC Capital Markets, HCA Healthcare Inc.’s Bill Rutherford said the Nashville-based company’s growth in the near term will be focus on ambulatory surgery centers, home health ventures, urgent care clinics and similar companies.
An emphasis on outpatient growth would be consistent with HCA’s 2021, when its executives spent $1.1 billion on acquisitions. Nearly $600 million of that amount went to the purchase of Florida urgent care chain MD Now and $330 million was used to buy 80 percent of Brookdale Senior Living’s home health and hospice business. By contrast, the company in 2020 spent nearly $2 billion to buy hospital systems in North Carolina and New Hampshire. (It also booked more than $1.2 billion in profits last year on the sale of five Georgia hospitals and several other holdings for a combined $2.2 billion.)
“I think … we’ll continue to see M&A in our network development side,” Rutherford said. “We may have opportunities to round out ... some of our existing markets with hospitals.”
HCA operates 182 hospitals and about 2,300 ambulatory sites of care in 20 states and the United Kingdom. That latter number is up from roughly 1,800 in mid-2018. Growing the former through larger deals (such as the 2020 purchase of Mission Health in North Carolina), Rutherford said, isn’t likely in the near term even though the COVID-19 pandemic has put pressure on a number of nonprofit operators who could choose to put themselves on the block.
“We’ll need some time to settle that out. Our experience indicates that, in times of market disruption, that generally creates some opportunities for us,” Rutherford added. “We can pursue those if they present themselves.”
During his comments at the RBC event, Rutherford also said that HCA is turning the corner in its use of premium contract labor – the company last month surprised investors with lower-than-expected first-quarter results and leaner guidance for the rest of 2022 – and that it expects to be recover some of the inflationary pressures it is having to handle when it negotiates new insurance contracts for 2023 and beyond.
“I think there’s acknowledgement about the cost environment that everybody finds themselves in and we want some consideration for that in our contracts,” he said of talks with payers. “We’ll work our way through that.”
Rutherford’s comments were echoed at the RBC conference by his peers at Tenet Healthcare Corp. and Community Health Systems. Tenet CFO Dan Cancelmi said recently signed contracts with Aetna and Blue Cross Blue Shield of Texas “certainly took inflation into consideration.”
“That’s not to say they’re going to ... look at CPI and what that’s doing and provide those type of rates,” Cancelmi said of insurers. “It’s all about negotiating appropriate, fair reimbursement for the quality of services we deliver.”
Shares of HCA (Ticker: HCA) were up about 1 percent to nearly $207 in midday trading May 23. Year to date, they’ve lost about 20 percent of their value, shrinking the company’s market capitalization to about $61 billion.
