Tenet Healthcare plans to acquire Vanguard Health Systems in a $4.3 billion deal that adds nearly 30 acute-care hospitals and outpatient clinics to its operations. The acquisition will increase Tenet’s geographic footprint while also boosting market share in certain established regions, including Texas.
This combination should help enhance Tenet’s scale and negotiating leverage with managed-care companies. Tenet appears to be paying a fair price for Vanguard and management expects the deal to close by year-end. Vanguard founder, CEO, and chairman Charlie Martin will join Tenet’s board of directors.
Analysts were not particularly surprised by this announcement, as management has highlighted acquisitions as a key component of its growth strategy. More acquisitions are likely to follow, particularly among outpatient clinics as Tenet attempts to build regional share in its new and established markets. As hospitals face greater reimbursement pressure from health-care reform, boosting patient volume and lowering operating costs remain the primary methods through which Tenet and its peers can expand the bottom line.
By acquiring Vanguard, management expects to realize as much as $200 million in annual cost synergies within two year, with most of the savings derived from overhead costs, supply chain management, and revenue cycle operations. Vanguard’s health plan operations may also boost Tenet’s integrated care capabilities, especially in the insurance exchanges where most patients will face narrower network plan options.