HMA Board Approves $7.6B CHS Acquisition
Adam Powell, a healthcare economist and president of Boston-based Payer+Provider Syndicate, says the new company that emerges from the acquisition "will have a larger footprint than any other company. Given the massive scale of the combined entity, it is likely to achieve both economies of scale and negotiating strength that HMA could never have achieved independently."
"It has been reported that building a hospital costs roughly $300 per square foot. Thus, spending $7.6 billion on hospital construction would yield about 25 million square feet of hospital space. If a large hospital has an average of about 600,000 feet of floor space, spending $7.6 billion on new hospital construction would yield about 40 hospitals. Thus, receiving 71 hospitals for the price seems like a deal," Powell says.
"That being said, not all of the hospitals may be optimally situated, and some may need to close, making them less valuable than new constructions. However, the hospitals have reputations and referral networks that new hospitals would not have. These intangibles add value, and may offset some of the drawbacks associated with acquiring a few undesirable hospitals."
John Commins is a senior editor with HealthLeaders Media.
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