Dallas-based Tenet Healthcare’s acquisition of Vanguard Health Systems is a credit negative for not-for-profit hospitals, according to a credit outlook issued this week by Moody’s Investors Service. The group reasons that the merger will have a negative impact on the not-for-profits because it increases competition, particularly for small stand-alone hospitals that operate in the Tenet and Vanguard markets.
The merger will operate 77 hospitals in 30 markets, and combined resources will enhance Tenet’s market power against smaller not-for-profits.
Tenet operates in 10 states; California, Florida, and Texas accounted for approximately 60 percent of its 2012 revenue. Tenet’s purchase of Vanguard expands its geographic base to Michigan, Illinois, Arizona, Massachusetts, and new parts of Texas. Not-for-profit providers have overwhelmingly dominated Massachusetts, Illinois, and Michigan. As has occurred in Boston and elsewhere, stronger for-profit operators disrupt longstanding market dynamics and physician allegiances, Moody’s said.
