2018 is still quite young, as we are writing in mid-February. Fifteen hospital mergers or acquisitions have reached the definitive agreement stage, which is when we consider them far enough along to include in our DealSearchOnline.com database. (If the deal falls apart later in due diligence or other process, it’s removed from the data.)
Of the 15 hospital deals announced so far, four (27%) were for stand-alone critical access hospitals (CAHs). That percentage will change, of course, as the year goes on. But consider 2017. Of the 74 U.S. hospital transactions announced, seven (9%) targeted a critical access hospital. For all the discussion of rural and community hospitals seeking larger partners, the numbers that succeed in any given year are surprisingly low.
There are 1,343 critical access hospitals left in the United States as of January 2018, according to Flexmonitoring.org, which bases its lists on CMS reports, augmented by information provided by state Flex Coordinators and data collected by the NC Rural Health Research Program on hospital closures.
CAHs represent a separate provider type with their own Medicare Conditions of Participation (CoP) as well as a separate payment method. Some of the CAH regulations accepted by the Centers for Medicare and Medicaid Services include:
- Be located in a state that has established a state Medicare Rural Hospital Flexibility Program;
- Be designated by the state as a CAH;
- Be located either more than 35-miles from the nearest hospital or CAH or more than 15 miles in areas with mountainous terrain or only secondary roads; OR prior to January 1, 2006, were certified as a CAH based on state designation as a “necessary provider” of health care services.
- Maintain no more than 25 inpatient beds that can be used for either inpatient or swing-bed services;
- Maintain an annual average length of stay of 96 hours or less per patient for acute inpatient care (excluding swing-bed services and beds that are within distinct part units);
- Furnish 24-hour emergency care services 7 days a week.
As a full-year total, 2017 had the highest representation of CAHs in the previous five years. Between 2013 and 2016, stand-alone CAHs made up between 6% and 8% of each year’s hospital M&A total.
The CAH acquirers in 2018 are all larger local health systems, not surprisingly. Three are located in states that did not expand Medicaid (Missouri, North Carolina and Wisconsin) and one is in Colorado, which did.
The CAH targets reported in 2017 show a more moderate mix of Medicaid expansion versus non-expansion states. Three were located in non-expansion states (Florida, Nebraska, Wisconsin), two were in states that have approved Section 1115 waivers (Arkansas and Michigan) and two were in the expansion states of Ohio and West Virginia.
