An interesting development in the healthcare space:
A court ruling rejecting a settlement that would have allowed Partners HealthCare to acquire three community hospitals could have industry implications well beyond Boston. The decision casts doubt on expansion strategies that promise to deliver more coordinated and cost-effective care.
Suffolk Superior Court Judge Janet L. Sanders’ decision on Thursday comes as hospitals and health systems nationwide move to build bigger networks. In a case that has been followed across the country, Sanders rejected the argument that hospital consolidation would help control costs through increased efficiency and suggested that Partners’ expansion would result in higher prices for consumers across Massachusetts.
As I’ve mentioned before, the nature of healthcare today is putting the squeeze on the operating margins of hospitals, especially the not-for-profit hospital systems. The smaller community hospitals, especially those not affiliated with larger investment-grade rated not-for-profit systems with substantial balance sheets, are getting hit especially hard. They are prime candidates for acquisition and I’m aware of executives at these hospitals reaching out to the larger systems to see if they can facilitate a sale.
However, the hospitals in most of need of help may encounter difficulties getting it. While the Partners deal does not make a trend, there is an increasing amount of push back at the state and local level against attempts to acquire community hospitals. In another case, in Connecticut, a joint venture between a for-profit and a not-for-profit system was disbanded due to a failed attempt to acquire four struggling community hospitals within the state. How this plays out will depend on the regulatory environment in each state, community resistance to consolidation or relocation, whether or not further consolidation of healthcare delivery triggers anti-trust concerns and the public interest at large.