HCA record buyout raises questions of health trends on Wall Street

Observers are unsure what the long-term impact of the deal might be on HCA and other health companies.

By Katherine Vogt, AMNews staff. Aug. 14, 2006.

If the proposed $33 billion leveraged buyout of the hospital giant HCA Inc. is completed, it will go down in the record books as the largest such deal of its kind in U.S. history.

But despite its stature, there is little consensus whether the colossal deal will leave much of a footprint on the greater health care industry or on the Nashville, Tenn.-based hospital operator itself.

While many acknowledge that there are plenty of private equity companies trolling for health care companies -- and others -- to add to their portfolios, some believe that HCA was uniquely positioned to be snapped up by private investors in a way that other public health care companies are not. And though some believe that the aging baby boomer population is making health care an attractive investment for the future, others say that pressures in the industry -- particularly those on hospitals --likely will keep many suitors away from other companies in the sector.

After weeks of speculation and rumors about a possible buyout, HCA announced July 24 that it had reached an agreement to be taken private by a consortium of investors for $21 billion, plus the assumption or repayment of nearly $12 billion in debt.

"When a hospital [company] can get that big, I think that's saying [Wall Street has] accepted the fact that for-profit health care is here to stay, and there are some benefits," said Greg Moerschel, a partner with Beecken Petty O'Keefe & Co., a health care private equity firm in Chicago.