Long-Term Sustainability of Merger and Acquisitions as a Growth Driver: A Case Study of Hospital Corporation of America

Abstract

Hospital Corporation of America (HCA) is well-known in the healthcare industry as being a giant in the hospital management sector. HCA’s current growth driver, mergers and acquisitions (M&A), was examined in order to determine whether the current growth strategy is sustainable. By measuring various financial metrics related to growth, finding the correlation to metrics relating to M&A activity, and considering qualitative evidence, analysis shows HCA's M&A activity has driven significant business growth for the firm. After calculating a suite of financial ratios intended to measure the financial health and sustainability of firms, it was determined that HCA's current growth strategy cannot be continued indefinitely on a sustainable basis, nor does is maximize shareholder value. Continued reliance on M&A activity for business growth is not sustainable for HCA, as found through the establishment of HCA's current growth strategy, and examination of the effects of this strategy financially.1