Latest / Becker’s Healthcare Podcast / Healthcare Consolidation and the Financial Outlook for Major Systems with Alan Condon

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Healthcare Consolidation and the Financial Outlook for Major Systems with Alan Condon · Becker’s Healthcare Podcast

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  This is Scott Becker with the Beckers HealthCare
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  podcast.
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  We're thrilled today to be joined by Alan
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  Condon.
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  Alan is a remarkable
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  leader and person.
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  He joins us regularly to talk about
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  the big financial stories in health care and
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  what he's watching.
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  Alan, let me tee it up and ask
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  you to take it away. What are the
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  couple of the key stories that you're watching
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  currently?
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  Yeah. Absolutely. Great to be back on with
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  you, Scott.
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  I think first and foremost, I'm gonna touch
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  on a a big health care merger acquisition
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  that we've been following for quite some time
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  and then maybe turn to something a little
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  bit more on the for profit,
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  health system financial side as well. So I
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  think one
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  mergers
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  that we've been following for quite some time,
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  relatively small,
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  but interesting given the parties, the major players
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  involved, and that's that's Union Hospital or Union
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  Health, I should say, in Terre Haute Indiana
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  and Terre Haute Regional Hospital.
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  That that hospital is actually part of HCA
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  Healthcare, but this was a merger that had
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  been
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  a lot of back and forth,
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  on both sides, opposition from state regulators,
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  some in favor at the local level. This
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  has just got over the finish line as
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  of December 13 following,
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  a really lengthy review process that actually included
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  the withdrawal
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  and the resubmission
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  of this, merger application to eventually get over
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  the line. So,
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  Union Health essentially has acquired all assets of
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  Terre Haute Regional again in Indiana. That's the
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  hospital owned and operated by HCA Healthcare.
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  And that merged health system in Indiana will
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  now be regulated under the state's,
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  COPPA or certificate of public advantage framework.
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  What's interesting about this merger is Union Health
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  had actually withdrew
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  their COPE application
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  in November
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  2024.
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  This is about a week before
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  the state was set to make a final
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  decision on the transaction.
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  The health system then resubmitted
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  that COPE application
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  two or three months later under the new
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  administration, the second term of president Donald Trump.
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  And then a couple months down the line,
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  we've we've got we've gotten to a point
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  where this where this merger has actually been
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  closed, squared away by state regulators.
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  No doubt that the president Donald Trump taking
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  arguably a less strict, less stringent stands
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  on some antitrust,
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  anticompetitive concerns and mergers and acquisitions
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  across industries,
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  including health care. So
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  something that,
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  an interest in merger given the the the
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  operators, HCA Healthcare, a for profit largest system
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  in the country,
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  merger in that Indiana at the local level,
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  and then also the the COPA statute, the
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  COPA application has another layer of complexity into
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  this merger.
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  But, again, long, long process just got over
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  the line.
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  The FTC,
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  this the Indiana attorney general both formally up
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  opposed this transaction,
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  citing some concerns around market competition, rising costs,
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  and whatnot. But despite that regulatory opposition,
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  local sentiment really leaned in favor of this
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  merger.
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  Recent town hall, really kinda 65% of folks
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  really in favor of this merger,
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  and, again, just over the line as of
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  December 13. So small but certainly substantial,
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  transaction that we've been following for some for
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  quite some time.
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  And give us a a broader update on
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  mergers and acquisitions.
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  Are are people expecting next year to be
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  a busier year for mergers and acquisitions,
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  or or how are people thinking about that
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  and looking at that?
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  I think that's a that's a great question,
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  something on top of all the health care
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  leaders' minds. I think
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  we're likely to see in 2026
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  kind of a carry on or pick up
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  on some of the momentum that we've seen
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  in in recent quarters of this year, again,
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  under under president Trump's,
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  administration. I think we're seeing mergers and acquisitions
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  pick up steam really through a variety of
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  factors. I think, number one, we're still seeing
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  quite a number of independent hospitals, health systems
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  that are still struggling there. Maybe they might
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  be might be pursuing a traditional merger and
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  acquisition, but certainly joint ventures, strategic partnerships,
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  new types of affiliations
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  with larger systems.
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  Certainly, we'll we're expected to see next year,
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  I think, on the community hospital front, on
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  the academic medical center front, a lot more
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  academic systems are snapping up some of those
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  community hospitals, critical access hospitals in their markets
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  and regions. And then again, we we've seen
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  a big pickup in terms of large
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  cross regional, cross market health system mergers in
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  the last couple of years. I think just
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  noted notably in what we've seen in close
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  this year, we look at Nuvance Health and
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  Northwell Health in Connecticut, New York. We look
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  at Sanford Health and Marshfield Clinic.
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  A couple of those big cross merge at
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  we expect to see
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  increase, maybe a higher level, excuse me, next
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  year than what we've seen in the past.
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  Again, we we've moved out of pandemic is
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  kind of way in the rearview mirror now.
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  We've kinda seen a slow rebound, a slow
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  return to some of these m and a
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  levels. But I think to your point, Scott,
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  still seeing,
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  no doubt a lot of financial challenges around
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  35%
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  of hospitals on the nonprofit side still
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  eking up towards the breakeven level, still operating
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  slightly in the red.
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  When we look at the challenges coming down
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  the pipeline next year in terms of potential
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  Medicaid cost that we know are coming into
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  effect late twenty twenty six, 2027,
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  ACA subsidies, still a lot of challenges there,
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  which are no doubt gonna drive
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  some of those hospitals that are still struggling
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  to turn somewhat of a corner to look
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  at some of those, mergers, acquisitions, or other
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  type of strategic partnerships with those,
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  larger houses and larger entities with a little
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  bit more financial strength behind them, I think.
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  Thank you. And are there other key stories?
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  We're watching this merger. We're watching sort of
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  the overview of things for 2026.
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  Any other key stories that you're following currently,
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  Alan, that you wanted to touch on?
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  Yeah. I think,
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  h so I think we we touched recently
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  on HCA real banner year in terms of
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  that stock price. I think really should call
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  out Tennant Healthcare
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  as well in line with this. In terms
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  of two of the country's largest
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  for profit health systems,
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  Tenet's based in in in Dallas, Texas, HCA
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  headquartered in Tennessee, Tenet around about 50 acute
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  care hospitals across The States at the moment.
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  No doubt heavily leaned into its its outpatient
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  growth, its ambulatory
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  arm, with USPI,
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  also its revenue cycle business in Conifer Health
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  Solutions. HCA still has substantial
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  acute care hospital footprint around about a 190
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  hospitals. We just talked about one merger in
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  Indiana that HCA was involved in there. But
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  both of these health systems, slightly different strategies,
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  but really,
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  fantastic
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  milestone years in terms of investor confidence, in
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  terms of all time they both hit all
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  time record high stock prices for both of
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  their respective businesses in in late November.
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  We touched a little bit on HCA, which
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  is to talk about Tenet.
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  Tenet's really refined its portfolio transformation over the
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  last couple of years. In 2024,
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  it sold, I believe, 14
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  hospitals in really,
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  really growing markets.
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  And and those 14 hospital sales, it collected
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  about almost $5,000,000,000
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  in revenue from those sales,
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  combined last year. At the same time, Tenet's
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  been pumping and investing money into its, its
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  ASC platform in USPI,
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  spending about $250,000,000,000
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  per quarter, I believe, on the de novo
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  acquisitions,
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  bills, ASC,
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  ASC investments across the board there. And just
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  to give you a sense of Kenneth's makeup
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  now, he said around about 50 acute care
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  hospitals in his portfolio. But when you look
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  at the the size and the scale of
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  u s p USPI, the number one ASC
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  chain in the country, USPI has ownership interest
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  in more than 530
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  ASCs across the country,
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  26 surgical hop hospitals. So really continuing to
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  invest, continuing to build and grow USPI while
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  selectively,
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  divesting some some of its hospital assets in
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  certain markets. And that's no doubt paid paid
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  real dividends for Wall Street in terms of
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  its investors.
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  Hit a record high stock price of $218
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  in the November,
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  similar to its for profit competitor, HCA. But,
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  really, both tennis and HCA continue to deliver
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  some of the strongest returns
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  in the hospital sector. I think investors no
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  doubt rewarding
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  operators of per scale with strategic discipline,
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  whether that's through divestitures,
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  outpatient growth, or some targeted acquisition. So just
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  a a quick update on just the the
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  progress and the leadership and just the the
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  financial performance of those big for profit operators
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  in HCA and Tenet Healthcare has been impressive
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  in 2025.
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  It's amazing. I saw that HCA hit a
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  new all time record high for its its
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  market cap, its stock.
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  Tenet really has transformed itself over the last
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  decade from a hospital chain to as much
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  an outpatient chain. Amazing what they have done.
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  Alan,
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  I wanna take a moment to thank you
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  for all of your contributions.
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  Just a remarkable leader at Beckers Health Care.
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  Allen Condon, thank you for joining us today
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  on the Beckers Health Care podcast.
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  And more importantly, thank you for all of
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  your leadership.
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  Always a pleasure. Thank you so much, Scott.
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  Much appreciated.