Large Hospitals with Low Profits Saw More Ownership Changes

Medium and large hospitals with low profit margins were more likely to experience ownership changes between 2016 and 2021 compared to their smaller and more profitable counterparts, according to a new report from HHS.

The report from the HHS Office of the Assistant Secretary for Planning and Evaluation (ASPE) analyzes new data CMS released on changes of ownership for hospitals and skilled nursing facilities enrolled in Medicare.

“Today, for the first time, we are releasing data on the impact of hospital and nursing home consolidation for people across our nation. By improving the quality of reporting by hospitals and nursing homes on ownership and consolidation, we also advance President Biden’s agenda to promote competition, lower healthcare costs for American families, and protect patients,” HHS Secretary Xavier Becerra said in a press release.

The data reflects information reported to CMS through the Provider Enrollment, Chain, and Ownership System (PECOS). Providers must enroll in PECOS to receive Medicare reimbursement. Organizations are required to update their owner data in PECOS within 30 days of when they experience a change in ownership.

According to the ASPE analysis, skilled nursing facilities were more likely to have ownership changes than hospitals. Between 2016 and 2021, 348 hospitals were sold, while more than 3,200 skilled nursing facilities saw ownership changes.

Nearly five percent of all hospitals were sold over the last six years, with certain types of hospitals seeing higher rates of ownership changes.

For example, smaller hospitals with 25 beds or fewer were less likely to be sold, with only 13 out of 1,668 (0.8 percent) experiencing ownership changes. Meanwhile, 7.8 percent of hospitals with between 26 and 64 beds and 6.3 percent of hospitals with 65 to 174 beds were sold.

Hospitals with low profit margins were also more likely to have an ownership change than hospitals with the highest profit margins—8.3 percent versus 3.0 percent.

Among different hospital types, long-term care facilities were sold at the highest rate, with 33 of 347 hospitals (9.5 percent) seeing an ownership change.

General short-term hospitals (4.7 percent) and rehabilitation hospitals (4.5 percent) were sold at around the national rate, while psychiatric hospitals (2.2 percent) and other health systems (1.9 percent) were sold at lower rates. Only one out of 1,330 critical access hospitals experienced an ownership change during the study period.

Additionally, changes in ownership were more common in urban hospitals (5.6 percent) than in rural systems (3.3 percent).

Hospital sales happened more frequently in certain states, including South Carolina, Kentucky, New Jersey, and Connecticut, where the rate was above 10 percent. Meanwhile, most states had rates of four percent or lower.

The ASPE analysis noted owner characteristics for hospitals and skilled nursing facilities as well. Most acquired hospitals (85.5 percent) have a single direct organizational owner. Nearly four percent of hospitals were purchased by individual owners.

Among acquired skilled nursing facilities, 62.3 percent have a single organizational owner, while 18.2 percent have individual owners.

CMS said it hopes that this data will help provide insight into how ownership changes impact costs and patient outcomes.

“Hospital and nursing facility consolidation leaves many underserved areas with inadequate or more expensive healthcare options,” CMS Administrator Chiquita Brooks-LaSure said in the press release.

“This new data gives researchers, state and federal enforcement agencies, and the public new opportunities to examine how mergers, acquisitions, consolidations, and changes of ownership impact access to care, care quality, and prices as a way to enable greater transparency and insight into the hospital and nursing home industries.”

The agency plans to update the ownership data on a quarterly basis.