Simple economics behind merger push for Henry Ford, Beaumont (Detroit Free Press)

November 1, 2012 – The planned merger of Henry Ford (A1 / 59465HMA1) and Beaumont (A1 / 780486GD2) health systems into a single, $6.4-billion nonprofit entity — a deal to combine 10 hospitals, 200 patient care sites and 41,000 employees — would mean better patient care, a financially stable employer and even more research money and clinical trials, leaders from the hospital systems said Wednesday. But the main reason behind the planned merger, at its heart, is simple economics: Combined, the two hospital systems would become more efficient and better positioned to face sweeping changes in health care reform, threatened budget cuts to Medicaid and Medicare, and an aging demographic that promises older, sicker patients as Medicare reimbursements shrink. “I don’t think it’s any secret to anyone that there are rapid changes in the health care landscape today across the country, at the statewide level and, certainly, in southeast Michigan,” said Gene Michalski, CEO of Royal Oak-based Beaumont. “There’s a monumental shift from inpatient care to outpatient care that is in part spurred by health reform, but it’s also enabled by technology. And there’s a demand for greater value in health care today, that is to say higher quality and lower cost.”

Link to Full Article: http://www.freep.com/article/20121101/BUSINESS06/311010243

Links to Other Relevant Articles:

Blockbuster merger of Beaumont and Henry Ford health systems about survival – Detroit Free Press 11/1/12

View from Wall St.: Henry Ford, Beaumont systems would be financially stronger together – Detroit Free Press 10/31/12

Beaumont-Henry Ford merger could save millions, say execs, board chairs – Crain’s Detroit Business 11/1/12

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Muni Guy Observation:

These are both reasonable credits with good debt service coverage (in the 3.0x –> 4.0x range) and adequate liquidity (100+ days cash on hand).  However, I don’t see a merged entity making the jump to the Aa category any time soon.

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