Deal or No Deal?

Back in the go-go healthcare reform mid-1990s Columbia/HCA Healthcare Corp. and Tenet Healthcare Corp. parried as fierce competitors in the investor-owned hospital market. In fact, their business acumen motivated five of the top 10 GPOs to merge their operations into two. Apparently, size mattered in the nascent boomlet of clinical pathways (colloquially called “cookbook medicine” back then) and integrated delivery network development.

Come February 2016, however, the successors to those two market-driving investor-owned organizations will be working together more closely than ever before, save for revenue cycle services.

At press time, Tenet reported that it would not renew its exclusive supply chain services contract with MedAssets and would join HealthTrust Purchasing Group, HCA’s supply chain services arm. Tenet previously worked with Broadlane, which was acquired by MedAssets in 2010.

Tenet represents 100 hospitals (81 acute care and 19 surgical) and occupied a considerable percentage of Broadlane’s reported $11 billion in annual purchasing volume five years ago. That sum amounts to a smaller piece of MedAssets’ annual purchasing volume of $51 billion ($28 billion of which it attributes to GPO services), according to federal filings.

What’s curious is that in this current age of Accountable Care Act-inspired mergers and acquisitions, it’s okay for two of the leading investor-owned hospital chains to co-mingle. Two decades ago, the industry would have suffered apoplexy on anti-competitive grounds not seen since distributor American Hospital Supply Co. tried to merge with provider HCA in 1985.

Of course, with federal regulators giving the green light to recent mega-merger moves in the insurance industry — Aetna picking up Humana and Anthem snatching up Cigna — the Tenet decision may not resonate as prominently with them. (For you healthcare history mavens, it’s intriguing to note that in the early 1990s, Humana sold its hospital division to the company that would blossom into HCA.)

Among quiet competitive reflection and genuflection these latest deals beg the question: If they are okay now, why weren’t they okay back then? Is President Obama’s healthcare reform initiative that much more formidable and threatening to fiscal and operational wellness than President Clinton’s was in the 1990s?

It’s a rhetorical query that should inspire some lively discussions as the 2016 campaign for the White House gets into full swing.

Yet imagine how much the healthcare industry’s landscape would have changed by now if Tenet had teamed up with HCA in HealthTrust had HealthTrust existed in its current state 20 years ago.

Nearly half of the not-for-profit hospitals would have worked through the top two GPOs at the time, the “new” Premier and Novation, with HPG adding another quarter to the mix. Many of those hospitals would have conducted their pharmaceutical and medical/surgical supply transactions with the top three distributors at the time, the “new” McKesson and AmerisourceBergen as well as Cardinal, which would not acquire Allegiance until late 1998. Interestingly, those distributors also were making serious plays for data management services as were the GPOs. Such decisions were widely held as monumental back then; today, they’re a standard business staple.

Looking backward at what might have been if we knew then what we know now can be amusing and enlightening as these two companies close their deal with a germ-free fist tap this coming winter.