The Big Get Bigger
On May 22, Reuters reported that the Pacific Business Group on Health, whose members include Boeing, Salesforce, Tesla, and Walmart, said in a letter addressed to congressional leaders that it feared that further consolidation in the health care industry could lead to higher costs.
The group noted that physician practices’ revenues plummeted due to bans on elective surgeries. They said even before the pandemic, big hospital systems were taking over smaller doctor groups and hospitals to increase market share.
There is now a fear these larger players are even stronger to buy struggling practices coming out of the crisis, raising health care prices for employers. The group asked for a year-long M&A ban for any health care provider receiving any of the $170 billion government relief approved for the industry.
Following the Money Trail
The case for mergers wasn’t helped with a May 25 New York Times analysis that showed federal bailouts are going to hospitals that had already built up deep financial reserves. By comparison, the analysis showed that smaller, poorer hospitals are receiving tiny amounts of federal aid by comparison.
The Times reported that 20 large chains received more than $5 billion in federal grants while sitting on more than $100 billion in cash.
Seattle-based Providence Health System was cited as sitting on nearly $12 billion and generating more than $1 billion in profits. Providence received at least $509 million in government bailouts. A Providence spokeswoman reportedly said the grants helped make up for losses from the coronavirus.
HCA Healthcare and Tenet Healthcare together received more than $1.5 billion in federal funds.
The Cleveland Clinic got $199 million. Last year $7 billion in cash helped generate $1.2 billion in investment profits. The Clinic reportedly paid investment advisers $28 million to manage the funds.
St. Louis-based Ascension Health, which operates 150 hospitals nationwide, has received at least $211 million. The company, with $15.5 billion in cash, operates a venture capital fund and an investment advisory firm that helps other companies manage their money.
