Just when it seemed like the furious pace of hospital mergers in America was slowing down, we learned Friday morning that Boston-based Steward Health Care System will buy Tennessee-based IASIS Healthcare for $1.9 billion. The deal will make Steward the largest private for-profit hospital operator in the country with 36 hospitals across 10 states.
This is not good.
Because the more hospitals merge, the more it costs all of us for our health care. In fact, the fast pace of hospital mergers over the last few years is most likely the biggest reason for the sudden spike in health insurance premium costs. Obamacare made this problem worse and there's nothing in the current Republican replacement to fix it. That's no coincidence. The hospital industry has both political parties under its sway.
First, let's look at the numbers. From 1998 to 2012, the roughly 5,000 or so hospitals in the United States saw 1,133 mergers and acquisitions. Then, according to health industry researchers Irving Levin Associates, things got even more heated. From 2013 to 2015, merger and acquisition activity among U.S. hospitals and health systems set new records.
The total number of health care transactions for 2015 was 1,503 deals, the first time annual deal volume broke the 1,500 or the 1,400 mark. And the 1,318 deals recorded in 2014 was the first time the number of deals broke the 1,200-mark. Total deal value for 2015 was more than $557 billion, a 44 percent increase from 2014's total of $388 billion. There was a slowdown in the furious pace in 2016, mostly because the process of absorbing these massive mergers takes time. But also, we did see some token regulatory resistance to the continued merger mania.
The culprit for the spike in mergers isn't hard to figure out: Obamacare. Once the ACA started to really go into effect, the increase in the number of people with health insurance made the hospital business potentially more profitable.
Insurance companies had to struggle to figure out how to cover people with pre-existing conditions while keep premiums down. Hospitals, however, got a big influx of paying customers. So they pounced, not only by consolidating traditional hospital facilities, but also by accelerating the already existing policy of buying up private practices and even many of those urgent care facilities we've seen popping up across the country over the past decade.