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Health care reform spurs corporate takeover

Bob Moon Feb 14, 2011

Health care reform spurs corporate takeover

Bob Moon Feb 14, 2011


Kai Ryssdal: Part of what the the health care law is supposed to do is get insurance coverage for more people. That idea has triggered a rash of takeovers in various parts of the health care industry. Today, the country’s biggest provider of ambulance services announced it’s agreed to a $3.2 billion buyout from a private equity firm. The company, Emergency Medical Services, is also a major manager of emergency-room doctors.

Our senior business correspondent Bob Moon explains the recent medical mergers.

Bob Moon: Investors looking for good returns have been piling up loads of cash in recent years. And lately, that money’s being directed at what’s increasingly seen as an attractive, and even willing, target.

Brian Tanquilut is a health sector analyst at Jefferies & Co.

Brian Tanquilut: There’s uncertainty that’s driving fear, especially among the smaller providers, and so the larger guys are saying, “Let’s take advantage of this small window of opportunity, and put deals together.”

The worry that he speaks of is, in large part, fear of the unknown.

Dawn Brock watches the health sector for Kaufman Bros. She says there’s still lots of uncertainty over how the health care overhaul will be implemented in the next few years.

Dawn Brock: Everybody’s trying to figure out how best to position themselves for that, how to consolidate strategically, make sure that they’ve got the size, the scope, the scale.

Size matters a lot, because insurance companies stand to gain a mass of new customers — and thus wield new bargaining clout against providers. Again, analyst Brian Tanquilut.

Tanquilut: I mean, if you’re part of a five doctor-physician practice group in a hospital, you don’t have any leverage. They’re going to eat you alive. They’ll say, “Here’s what we’re paying — if you don’t want it, we’ll walk away and give it to another doctor.”

But analyst Dawn Brock isn’t worried that the “big” might grow to become so powerful that they could capture too much control.

Brock: What you’re talking about is private equity guys or some of the larger companies trying to get bigger. But by no means are the numbers big enough to take over an industry. Not in health care.

As Brock sees it, the health sector is just too big to control when it makes up 17-plus percent of the country’s whole economy.

I’m Bob Moon for Marketplace.

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