Hospital and nursing home sales: New federal report offers more insight

Calling it a step toward increased transparency and quality in healthcare, the U.S. Department of Health and Human Services has released a new report on the sale and mergers of hospitals and nursing homes.

The department released the report Wednesday, April 20 and also is posting more data online (data.cms.gov) so researchers, regulators and everyday people can scour the information and spot trends related to changes in ownership. The Centers for Medicare and Medicaid Services plan to do quarterly updates on changes in ownership.

“This data is a powerful new tool for researchers, state and federal enforcement agencies, and the public to better understand the impacts of consolidation on health care prices and quality of care,” the department said in a news release.

The report analyzes changes in ownership between 2016 through 2021 and offers interesting perspective on the healthcare industry. A key takeaway: Nursing homes are far more likely to see ownership changes than hospitals.

Over the six-year span, 3,236 skilled nursing facilities were sold. In that same span, 348 hospitals were sold. Put another way, about 10 out of every 1,000 hospitals were sold, while nearly 40 skilled nursing facilities out of 1,000 changed hands.

President Joe Biden says improving the nursing home industry is a top priority. In a 604-page report released earlier this month, the National Academies concludes “the way in which the United States delivers care in nursing home settings is ineffective, inefficient, fragmented,and unsustainable.” The report also calls for more transparency so the public can see which nursing homes and ownership groups are falling short.

The Biden administration has also taken a keen interest in hospital mergers.

In an executive order to promote competition, Biden urged federal regulators  to enforce antitrust law vigorously. The White House called for federal authorities to pay close attention to the healthcare market, including hospital consolidation. Critics say hospital mergers often lead to higher prices for consumers.

HHS Secretary Xavier Becerra touted the release of the report as a step toward reducing costs and improving competition.

“Today, for the first time, we are releasing data on the impact of hospital and nursing home consolidation for people across our nation,” Becerra said in a statement accompanying the report. “By improving the quality of reporting by hospitals and nursing homes on ownership and consolidation, we also advance President Biden’s agenda to promote competition, lower health care costs for American families, and protect patients.”

CMS Administrator Chiquita Brooks-LaSure said she hoped the data helps improve health equity and noted concerns about the higher costs that come with mergers.

“Hospital and nursing facility consolidation leaves many underserved areas with inadequate or more expensive health care options,” Brooks-LaSure said in a statement.

“This new data gives researchers, state and federal enforcement agencies, and the public new opportunities to examine how mergers, acquisitions, consolidations, and changes of ownership impact access to care, care quality, and prices as a way to enable greater transparency and insight into the hospital and nursing home industries," she said.

Here are some other noteworthy takeaways from the report.

• Ownership changes were most common among medium or large hospitals. Smaller hospitals, those with 25 beds or fewer, were rarely sold.
• Urban hospitals were more apt to be sold than rural hospitals. In fact, only one critical access hospital out of 1,330 was sold in that six-year span.
• Hospitals with the lowest profit margins (negative 2% or worse) were more likely to be sold than providers with better profit margins.
• Long-term care hospitals were more likely to change hands than other types of hospitals. Nearly 10% of long-term care hospitals were sold, compared to short-term care hospitals (4.7%).
• South Carolina had the highest rate of hospital ownership changes. During the six-year period, 14 of the state’s 73 hospitals (19%) changed ownership.
• Kentucky, New Jersey, and Connecticut also had high rates of sales, with more than 10% of the hospitals in each state changing hands. In most states, the rate of hospitals being sold was 4% or less.
• Most purchased hospitals (85.5%) have one single direct organizational owner, while 62% of skilled nursing facilities have a single organizational owner.

Future studies of the data could examine the correlation between changes of ownership and healthcare quality and cost, the report stated.

Hospital mergers have slowed down during the COVID-19 pandemic. There were only 12 hospital mergers in the first quarter of 2022, the smallest first quarter number in years, according to a Kaufman Hall analysis. The number of mergers in 2021 was the lowest in a decade.

Still, analysts have projected there will be more merger activity in the year ahead, particularly as smaller hospitals struggle financially and may need to find partners to survive.