- For-profit hospital operator LifePoint Health has agreed to acquire rehab and long-term hospital operator Kindred Healthcare. The purchase price was not disclosed but the private-equity backed companies had about $14 billion in combined revenue in 2017, the most recent public information about their operations before they were taken private.
- The deal would give LifePoint more than 200 acute care, long-term care and rehabilitation hospitals. It's expected to close in the fourth quarter of this year, the companies said Monday. They stipulated the transaction does not involve use of federal coronavirus relief funds.
- Once the deal is closed, LifePoint said it would spend $1.5 billion over the next three years on capital improvements, hiring more front-line staff and investments in new technology.
Brentwood, Tennessee-based LifePoint, founded in 1999, is one of the smaller for-profit hospital chains, but it has deep pockets through its parent company, private equity firm Apollo. It acquired LifePoint in 2018 for $5.6 billion. And while LifePoint was rumored to be in talks with Ardent Health Services earlier in the year, it has now announced a deal to acquire the Louisville, Kentucky-based Kindred.
Kindred was also acquired by private equity groups along with Humana in 2018. They split off the long-term care and home health components. Humana recently agreed to buy the remaining stake in Kindred at Home for $5.7 billion.
The deal announced Monday would combine LifePoint's 87 hospitals across 29 states, along with more than 50 post-acute facilities and more than 35 outpatient clinics, with Kindred's 62 long-term acute care facilities as well as inpatient rehabilitation locations and more than 100 outpatient rehabilitation clinics.
LifePoint has about 53,000 employees and Kindred about 24,000, according to the companies.
The creation of a company with that such a large footprint of hospitals campuses and providers will like garner antitrust scrutiny, but its more vertical nature could avoid attempts to block the deal.
The Federal Trade Commission has stepped up its intervention of horizontal hospital M&A recently, moving to block hospital acquisitions in New Jersey, Memphis and Philadelphia — although it dropped the last challenge.
The agency has mostly examined how deals could limit negotiation options for insurers and therefore affect prices. However, it has said it will also look more closely at effects on labor markets and worker wages.
And HHS Secretary Xavier Becerra has an aggressive antitrust track record from his last job as California's Attorney General, telling lawmakers at his Senate confirmation hearing the he will go after providers that "unfairly jack up prices on patients."
Hospital M&A is expected to continue at a robust clip, despite the challenges surrounding the COVID-19 pandemic. The deal announced Monday aligns with Moody's analysts' contention that for-profit operators are likely to look for acquisitions that bolster offerings outside the traditional hospital setting.
This latest pact is the second large hospital transaction announced in recent days, as Beaumont Health and Spectrum Health announced a deal late last week, not long after Beaumont called off a merger with Advocate Aurora Health. CommonSpirit Health and Essentia Health have also abandoned a deal.