Dive Brief:
- The pace of mergers and acquisitions among for-profit hospitals should speed up in the near future as health reform works its magic on the marketplace, according to Moody's.
- Hospitals are positioned to have higher margins as the number of uninsured patients drops under the Affordable Care Act, which could help spark acquisitions.
- To complete these transactions, Moody's expects for-profit hospitals to borrow against future revenue from patients newly insured under the ACA.
- Ideally, hospital M&A will allow hospitals to diversify into new areas of high-margin profitability. But hospitals risk stumbling if they diversify into new businesses they don't understand, Moody's suggests.
Dive Insight:
Of all of the healthcare industry sectors, hospitals arguably have the most to gain under the ACA. (Yes, health insurance companies are going to make billions, but hospitals need the money more.) But despite the added patient income that comes with the newly insured, there's a lot of question marks around that could throw hospitals' M&A schemes for a loop. If nothing else, the profound dislocation created by the failure of Healthcare.gov suggests that that nice, fat increases in margin are depending on a lot of things breaking the right way. In other words, simply assuming that the added ACA revenue will appear sometime in Q1 2014 may be a bit of a stretch..Let health reform sort itself out first!