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Fitch: For-Profit Hospital Mergers Still Spurred by Affordable Care Act

Written by Bob Herman | May 02, 2013
For-profit hospital systems in the United States continue to look to the merger and acquisition market to spend their cash because the Patient Protection and Affordable Care Act encourages — directly and indirectly — consolidation in the industry, according to a report from Fitch Ratings. 

Many of the largest for-profit hospital chains have posted their first-quarter financials, and a common theme is running in each report: Volumes are down, which is leading to lower-than-expected profits and revenue. 

Under the PPACA, for-profit hospitals will see an increase in insured patients, particularly in the outpatient setting, but Fitch analysts do not see this as a "panacea for slowing growth" in patient volumes. Consequently, hospitals are turning to consolidation to boost bottom lines because acquisitions represent a "bottom-up solution" to offset weak patient growth.

"A trend of industry consolidation is reflective of the fact that economies of scale and vertical consolidation will support profitability in an environment where healthcare providers face slow organic growth and are required to accept more financial risk, such as through bundled or value-based payments," according to Fitch's report.
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