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Community Health's Hostile Takeover Attempt Shatters Holiday Calm

Philip Betbeze, for HealthLeaders Media, December 31, 2010

As the new year is upon us, the fight is getting more spirited. On Dec. 20, Tenet issued its latest response to the offer, below:

"We believe that Community Health intends to nominate candidates for election to the Tenet Board of Directors solely to help advance its inadequate and opportunistic proposal to acquire Tenet. As announced on December 9, 2010, the Tenet Board, after consultation with its financial and legal advisors, unanimously determined that the Community Health proposal to acquire Tenet for $6.00 per share in cash and stock grossly undervalued Tenet and was not in the best interests of Tenet or its shareholders. Tenet shareholders – not Community Health – deserve to benefit from Tenet's growth as we continue to expand margins and benefit from the strategic investments we are making in our business. We are confident that the continued execution of our plan will deliver significantly more value to our shareholders than Community Health's inadequate proposal."

I can't remember a hostile takeover attempt in healthcare before, yet we have one now. What's changed? Well, to start, very many of the previously uninsured are going to get coverage, albeit at a low rate of reimbursement. The way to make that work if you're a hospital operator: scale—plain and simple.

Here's something all of this excitement tells me. Don't believe what all the naysayers say about healthcare reform transforming the industry it regulates into a profitless backwater in the American economy. That's clearly not the case, as these smart people on both sides of this proposed deal already know.

Here's something else. This deal is far from being dead. Others are likely to offer Tenet a deal, including private equity. And don't rule out Community. They may still be able to get the deal done-- it'll probably just get done at a higher price.

Same as your next artificial hip, pacemaker or stent.

Philip Betbeze is senior leadership editor with HealthLeaders Media.
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