Yet another large hospital company is going private with funds from two private equity firms. Triad Hospitals joins HCA in safer waters off Wall Street’s public trading floors. Sponsoring the buyout are Goldman Sachs Capital Partners and CCMP Capital with its JP Morgan Private Equity roots. Providing legal advice on the deal is Baker Botts L.L.P., James Baker’s law firm.
Mr. Baker also has deep connections within The Carlyle Group. In July 2005 Carlyle indicated its interest in expanding the firm’s healthcare holdings.
While Carlyle had the bad luck of missing out on both the HCA and Triad deals, it did close on two important deals, LifeCare Holdings and Multiplan. LifeCare operates long term acute care hospitals while Multiplan is a large preferred provider organization (health insurer).
President Bush is doing his best to help Carlyle make money off both acquisitions. His White House Lessons Learned report post Hurricane Katrina omitted LifeCare’s 24 patient deaths from its analysis. That should the company as it defends itself in the many civil suits brought by loved ones.
The President’s new health insurance tax credit should help a company providing coverage to over 70 million Americans. Medicare modernization opens the door for Multiplan to make big money off Uncle Sam, just like Humana, WellPoint and UnitedHealth. As Medicare and Medicaid need to save money will Carlyle’s later purchase come to the rescue? The addition of Private Healthcare Systems, a comprehensive medical cost management company could be the Alka Seltzer for federal budget indigestion.
It’s clear how insurance companies can benefit from the President’s plans but how will private for-profit hospitals do, especially as Bush proposes cutting payments to hospitals caring for the uninsured? Most safety net hospitals are non profit community hospitals or governmental institutions. Few HCA or Triad Hospitals get any disproportionate share funds. They currently have clear programs intended to minimize uncollectible accounts. Triad refers to theirs as a bad debt “operational initiative” in their recent CIBC presentation
The President’s plans stand to cut the number of uninsureds by 5 to 10%. For profit hospitals will compete for and land many of these patients. Meanwhile safety net hospitals will struggle financially with many of them approaching the for profit sector for a possible merger. It just happened in my hometown as Shannon Medical Center briefly flirted with Triad. Denny Shelton, Triad’s CEO clearly spoke to the financial distress faced by many nonprofits as he touted the merger.
The buzzards circle America’s government sponsored health insurance efforts. Some are disguised as insurers while others are providers. Regardless they pick at Medicare, Medicaid, CHIP and the carcasses of many community hospitals.