Nearly $8 billion wasn’t enough to convince one Tennessee health care company to merge with another this week.
Nashville-based Amsurg made the offer to TeamHealth, a company based in Knoxville. TeamHealth's specialty is physician outsourcing — hiring and managing doctors for hospitals — while Amsurg is in a different line of work: It owns hundreds of surgical centers across the country.
But Amsurg got into the physician outsourcing business last year, when it acquired a smaller competitor of TeamHealth. This new purchase would have grown Amsurg's presence in that sector — which is valuable in the modern health care industry, says Renee Burnham, a health care analyst with Decision Resources Group.
The larger companies are nowadays, she says, the more leverage they have when trying to make deals with other growing companies.
“There’s been just a very constant stream of consolidation in the health system," Burnham says.
So even though $7.8 billion sounds like a lot, acquisitions are now going for a premium.
“I don’t want to say that that's peanuts, but earlier this year, the health care world watched as Anthem set out to purchase Cigna," she says, referring to two of the biggest health insurance companies in the country. "The first offer was around $48 billion."
And Cigna only agreed to that merger after Anthem offered more.
In the case of the Tennessee companies, TeamHealth told Amsurg that the $7.8 billion proposal was an “insufficient value.” Burnham says she wouldn't be surprised if the company is waiting for a better offer.