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Becker’s Healthcare Podcast
Healthcare Consolidation and the Financial Outlook for Major Systems with Alan Condon
00:09:25
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- [00:00]
A
This is Scott Becker with the Becker's Healthcare Podcast. We're thrilled today to be joined by Ellen Condon. Alan is a remarkable leader and person. He joins us regularly to talk about the big financial stories in health care and what he's watching. Alan, let me tee it up and ask you to take it away. What are the couple of the key stories that you're watching currently?
- [00:26]
B
Yeah, absolutely. Great to be back on with you, Scott. I think first and foremost let me touch on a big healthcare merger acquisition that we've been following for quite some time and then maybe turn to something a little bit more on the for profit health system financial side as well. So I think one merger that we've been following for quite some time, relatively small but interesting given the parties, the major players involved, and that's Union Hospital or Union Health, I should say, in Terre Haute, Indiana and Terre Haute Regional Hospital. That hospital is actually part of HCA Healthcare. But this was a merger that had been a lot of back and forth on both sides. Opposition from state regulators, some in favor at the local level. This has just got over the finish line as of December 13th following a really lengthy review process that actually included the withdrawal and the resubmission of this merger application to eventually get over the line. So Union Health essentially has acquired all assets of Terre Haute Regional again in Indiana. That's the hospital owned and operated by HCA Health Care. And that merged health system in Indiana will now be regulated under the state's COPPA or Certificate of Public Advantage framework. What's interesting about this merger is Union Health had actually withdrew their copa application in November 2024. This was about a week before the state was set to make a final decision on the transaction. The health system then resubmitted that COPA application two or three months later under the new administration, the second term of President Donald Trump. And then couple months down the line we've got, we've gotten to a point where this merger has actually been closed squared away by state regulators. No doubt the President Donald Trump taking arguably a less strict, less stringent stance on some antitrust, anti competitive concerns and mergers and acquisitions across industries including health care. So something that an interesting merger given the operators, HCA Healthcare for profit largest system in the country merger in that Indiana at the local level and then also the COPPA statute. The COPA application adds another layer of complexity into this merger. But again, long, long process just got over the line. The ftc, the Indiana Attorney general both formally opposed this transaction citing some concerns around market competition, rising costs and whatnot. But despite that regulatory opposition, local sentiment really leaned in favor of this merger. Recent town hall really kind of 65% of folks really in favor of this merger. And again just over the line as of December 13th. So small but certainly substantial transaction that we've been following for quite some time.
- [03:23]
A
And give us a broader update on mergers and acquisitions. Are people expecting next year to be a busier year for mergers and acquisitions or how are people thinking about that and looking at that?
- [03:35]
B
I think that's a great question. Something on top of all the healthcare leaders minds, I think we're likely to see in 2026 kind of a carry on or a pickup on some of the momentum that we've seen in recent quarters of this year again under President Trump's administration. I think we're seeing mergers and acquisitions pick up steam really through a variety of factors. I think number one, we're still seeing quite a number of independent hospitals, health systems that are still struggling there. Maybe they might, might be pursuing a traditional merger and acquisition, but certainly joint ventures, strategic partnerships, new types of affiliations with larger systems. Certainly we're expected to see next year. I think on the community hospital front, on the academic medical center front, a lot more academic systems are snapping up some of those community hospitals, critical access hospitals in their markets and regions. And then again we've seen a big pickup in terms of large cross regional, cross market health system mergers in the last couple of years. I think just notably in what we've seen and close this year. We look at Nuvance Health and Northwell Health in Connecticut and New York. We look at Sanford Health and Marshfield Clinic, a couple of those big cross margin workers. We expect to see increase, maybe a higher level, excuse me, next year than what we've seen in the past. Again we've moved out of pandemic is kind of way in the rear view mirror. And now we've kind of seen a slow rebound, a slow return to some of these M and A levels. But I think to your point Scott, still seen no doubt a lot of financial challenges. Around 35% of hospitals on the nonprofit side still eking up towards the break even levels, still operating slightly in the red. When we look at the challenges coming down the pipeline next year in terms of potential Medicaid cuts that we know are coming into effect late 2026, 2027, ACA subsidies, still a lot of challenges there which are no doubt going to drive some of those hospitals that are still struggling to turn somewhat of a corner to look at some of those mergers, acquisitions or other type of strategic partnerships with those larger house systems. Larger. And these with a little bit more financial strength behind them, I think.
- [05:44]
A
Thank you. And are there other key stories we're watching this merger? We're watching sort of the overview of things for 2026. Any other key stories that you're following currently, Alan, that you wanted to touch on?
- [05:57]
B
Yeah, I think so. I think we touched recently on hca. Real banner year in terms of that stock price. I think really should call out Tenet Healthcare as well. In line with this in terms of two of the country's largest for profit health systems, Tenet based in Dallas, Texas, HCA headquartered in Tennessee, Tenet around about 50 acute care hospitals across the states at the moment, no doubt heavily leaned into its outpatient growth, its ambulatory arm with uspi, also its revenue cycle business and Conifer Health Solutions. HCA still a substantial acute care hospital footprint around about 190 hospitals. We just talked about one merger in Indiana that HCA was involved in there. But both of these health systems, slightly different strategies but really fantastic milestone years in terms of investor confidence. In terms of all time, they both hit all time record high stock prices, prices for both of their respective businesses. In late November, we touched a little bit on hca, which is to talk about Tenet. Tennant's really refined its portfolio transformation over the last couple of years. In 2024, it sold, I believe, 14 hospitals in really, really growing markets. And those 14 hospital sales, it collected about almost $5 billion in revenue from those sales combined last year. At the same time, Tenet's been pumping and investing money into its its asc platform in USPI, spending about $250 billion per quarter, I believe on de novo acquisitions bills, ASC, ASC investments across the board there. And just to give you a sense of Tennant's makeup now, I said around about 50 acute care hospitals in its portfolio. But when you look at the size and the scale of USPI, the number one ASC chain in the country, USPI has ownership interest in more than 530 ASCs across the country, 26 surgical hospitals. So really continuing to invest, continuing to build and grow USPI while selectively divesting some of its hospital assets in certain markets. And that's no doubt paid paid real dividends for Wall street in terms of its investors hit a record high stock price of $218 in the last week of November, similar to its for profit competitor hca. But really both tennis and HCA continue to deliver some of the strongest returns in the hospital sector. I think investors no doubt rewarding operators at Paris scale with strategic discipline, whether that's true divestitures, outpatient growth or some targeted acquisitions. So just a quick update on just the progress and the leadership and just the financial performance of those big for profit operators in HCA and Tenet Healthcare has been impressive in 2025.
- [08:52]
A
It's amazing. I saw that HCA hit a new all time record high for its market cap, its stock. Tenet really has transformed itself over the last decade from a hospital chain to as much an outpatient chain. Amazing what they have done. Alan, I want to take a moment to thank you for all of your contributions. Just a remarkable leader at Becker's Healthcare, Alan Condon, thank you for joining us today on the Beckers Healthcare podcast. And more importantly, thank you for all of your leadership.
- [09:19]
B
Always a pleasure. Thank you so much, Scott. Much appreciate it.