Thursday, September 02, 2010

HCA Dominates Most Profitable Hospitals

HCA owns eleven of the America's top twenty-five "most profitable hospitals." HCA's investors filed a S-1, taking the company public in a $4.6 billion stock sale. Investors include Bain Capital Partners, LLC, Kohlberg Kravis Roberts & Co., Merrill Lynch Global Private Equity, Citigroup Inc., Bank of America Corporation and HCA founder Dr. Thomas F. Frist, Jr.

HCA paid those investors $2.25 billion in special dividends in the last year. They expect $2.1 billion in IPO proceeds, giving them a take of $4.35 billion.

Community Health Systems has three of the top twenty five, including the most profitable hospital, Flowers Medical Center in Dothan, Alabama. CHS acquired Flowers from Triad Hospitals, near the time KKR purchased HCA. The two deals increased interest expense by over $2 billion. That cost is passed on to patients

Ironically, huge profits, special dividends, and dramatically increased interest expenses are hallmarks of private equity underwriters (PEU's). They're salivating over health care reform.

While Mayo has two hospitals on the list, they utilize a vastly different management philosophy, one focused on quality. While President Obama talks a good quality game, his plans don't include Mayo's methods. His reform mantra could be "hold the Mayo."

No comments: