Dec 4, 2019

Private equity eyes another rural hospital chain

A computer monitor in a hospital room showing vitals signs.

Photo: Andrew Lichtenstein/Corbis via Getty Images

Private equity giant KKR has floated a private buyout of Quorum Health, a 24-hospital system that operates in rural and small suburban communities, for about $30 million, or $1 per share. Quorum executives said they would "carefully consider" any deal.

Where it stands: Private equity has increasingly bought up hospital chains, doctors' groups, and ground and air ambulance companies due in large part to those firms' inherent market power. KKR, for example, just took physician staffing firm Envision Healthcare private for $10 billion last year.

Private equity has shown particular interest in publicly traded hospital systems — most recently with major deals for LifePoint Health and Iasis Healthcare.

By the numbers: Quorum, a group of hospitals that Community Health Systems spun out in 2016, has lost $446 million since 2017.

  • The company has struggled with high interest expenses from its debt, as well as a drop in hospitalizations and surgeries.

Yes, but: Quorum still generates $1.6 billion of revenue every year by owning hospitals that have monopoly or near-monopoly power in their markets.

  • That concept is attractive to any investment group willing to take on risk. But that raises questions about costs and quality for patients, and what the future holds if private equity decides to abandon a hospital.
  • Quorum executives also hinted during its latest earnings call that its hospitals will be more aggressive in collecting payments from health insurers and patients starting next year.
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