US Healthcare: Major acquisitions and divestitures in 2014

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Healthcare industry mergers and acquisitions forecast

According to an outlook survey conducted by healthcare law firm Bass, Berry & SIMS plc and the Mergermarket Group, the healthcare industry (XLV) is expected to witness a surge in mergers and acquisitions activity in 2014–2015. Healthcare providers and healthcare IT companies in particular, are the sub-sectors in which most of this activity is expected to occur.

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Major acquisitions

On a year-to-date basis, Community Health Systems (CYH) completed four acquisitions in 2014. Other hospital operators, including HCA Holdings Inc. (HCA), Universal Health Services, Inc. (UHS), and Tenet Healthcare Corporation (THC), completed four, three, and three acquisitions, respectively.

On October 1, 2014, Community Health Systems acquired Natchez Regional Medical Center, a 179 licensed-bed facility in Mississippi. On November 1, 2014, the company announced the acquisition of Upstate Carolina Medical Center in Gaffney, South Carolina. These acquisitions are each expected to earn up to $40 million in annual revenues for the company. Community Health Systems will also complete the acquisition of MetroHealth in Grand Rapids, Michigan, by the first half of 2015.

Divestitures

As a condition to the approval of the $7.6 billion megamerger with Health Management Associates (or HMA), the Federal Trade Commission directed Community Health Systems to divest hospitals and related outpatient facilities in Alabama and South Carolina.

Without these divestitures, the Commission claims the merger would substantially reduce competition for general acute care inpatient services, leading to an effective monopoly in these states. This would affect the pricing of services provided to commercial health plans and to commercially insured people in Alabama and South Carolina.

Accordingly, Community Health Systems is completing the divestiture of Carolina Pines, an HMA facility in South Carolina, by December 1, 2014, for approximately $70 million. To reduce corporate overhead, the company also sold former HMA headquarters for $34 million.

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