HCA’s Mission plan would add for-profit wrinkle to hospital mix

 In May 2018

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In March, Mission Health CEO Ronald Paulus told Business North Carolina that hospital industry consolidation is likely to continue “for a long time.” Less than a month later, Paulus announced the Asheville-based system’s pending sale to industry giant HCA Healthcare. Details won’t be disclosed for months as the companies and regulators study the transaction, though Paulus hinted that more than $1 billion will flow from Nashville-based HCA into a foundation supporting health care programs in western North Carolina. As a private company, HCA also would pay tens of millions of dollars in property-tax revenue that not-for-profit Mission now avoids.

Selling Mission to a publicly traded company surprised many industry executives in North Carolina, where only 17 of the 138 hospitals are owned by for-profits, according to the N.C. Healthcare Association. None of the state’s big systems are privately owned. But HCA, which reported a $2.2 billion profit last year, isn’t likely to stop its expansion in the west. “HCA has said they are incredibly impressed with our management team,” Paulus says. While a lot can change, he envisions “mostly the same people doing mostly the same things with a lot of additional hours involved.”

Industry analyst Anu Singh told the FierceHealthcare newsletter that Mission officials were likely impressed with HCA’s desire to use the system as a beachhead to expand regionally. That strategy makes more sense than buying a variety of smaller scattered hospitals, he said.

HCA typically acquires systems that dominate their respective markets, and Mission has a 50% market share of its 11-county market, including 75% in Buncombe County, according to Modern Healthcare magazine.

Mission’s decision to sell was influenced by its relatively limited number of private-pay patients: About 75% of system clients are on Medicare or Medicaid or lack insurance coverage, Paulus says. Reimbursements for those patients is less than the system’s costs, a deficit that HCA can presumably erase because of its greater purchasing power and use of the newest technology for data and analytics.

Mission is the region’s largest employer with a staff of about 10,000. The deal would add Mission’s six medical centers to HCA’s 177 hospitals and 119 surgical centers in the U.S. and United Kingdom.

N.C. Attorney General Josh Stein, who has the final say on the merger, will study if the deal “takes into account the charitable nature” of Mission, says spokeswoman Laura Brewer.

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