Dive Brief:
HCA Healthcare completed its $110 million purchase of Manchester, New Hampshire-based Catholic Medical Center on Feb. 1, a spokesperson confirmed to Healthcare Dive. The deal is the latest in a growing trend of hospital acquisitions motivated by financial distress.
HCA received regulatory approval to purchase CMC in January, after the New Hampshire attorney general’s office determined CMC was on the brink of bankruptcy and could soon close its 330-bed acute care facility without a buyer.
Regulators imposed significant conditions on the sale and will monitor HCA for compliance over 10 years. For example, HCA will be required to invest $200 million to expand healthcare capacity in New Hampshire and preserve critical service lines for the duration of the monitoring period, including pregnancy care.
Dive Insight:
CMC has struggled financially for years, according to a report from the attorney general’s charitable trusts unit. However, a series of negative pressures coalesced in recent years to drive the system to the brink of bankruptcy, including rising expenses, disruptions to CMC’s anesthesia business and a failed electronic medical record implementation.
In its 2024 fiscal year, CMC is projecting a $41.5 million loss and its debts hovered around $160 million, according to the report.
The attorney general’s office concluded CMC was “unable to continue borrowing” in its current financial state, and its cash reserves were insufficient to meet pressing operational demands, including replacing a “crumbling power plant.”
Credit ratings agencies S&P Global Ratings and Moody’s Ratings downgraded CMC during the summer of 2024, and S&P warned a further downgrade was possible if CMC’s deal with HCA did not close.
Regulators ultimately agreed that CMC needed a buyer.
In January, New Hampshire Attorney General John Formella called the terms a “thoughtful approach that both addresses the insurmountable financial challenges CMC is facing and ensures that the healthcare needs of New Hampshire residents continue to be met.”
Under the deal, CMC’s acute hospital will join HCA’s three other hospitals in New Hampshire — Portsmouth Regional Hospital, Frisbie Memorial Hospital and Parkland Medical Center — to form a four-hospital system, according to a press release.
HCA has pledged to make multiple capital investments in CMC and will maintain CMC’s Catholic identity.
Still, HCA didn’t sail through the review process without scrutiny.
The attorney general’s office of charitable trusts expressed uneasiness about ongoing litigation in North Carolina related to HCA allegedly cutting oncology and emergency services at Mission Health following its 2019 acquisition of the health system. The report noted HCA made similar cuts to delivery services at Frisbie Memorial Hospital in New Hampshire when it acquired the hospital in 2020.
Still, as the regulators put it: “any deal that ensured a hospital will remain on Manchester’s west side in some form was better for the community than no deal at all.”
New Hampshire regulators’ steadfast prioritization of keeping hospital doors open, despite possible risks associated with the new buyer, contrasts with a similar case that occurred in North Carolina last year.
The Federal Trade Commssion sued to block Novant Health from purchasing distressed hospitals from Community Health Systems, citing threats to competition. At the time, CHS warned that it might have to shutter the facilities without Novant’s financial support. Still, the FTC did not back down and ultimately succeeded in blocking the transaction.
Different approaches to regulating distressed deals will likely be in the spotlight this year, experts say.
Mergers and acquisitions involving a distressed party hit all-time highs last year, according to a recent report from consultancy Kaufman Hall. The consultancy expected to see more distressed deals as health systems seek stability in 2025.
