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Tenet to Buy Vanguard Health amid 'Obamacare' M&A Frenzy

Medicaid-focused healthcare providers such as Centene (CNC), Molina Healthcare (MOH) and WellCare Health Partners (WCG) have been seen by analysts as possible industry consolidators.

In the wake of consolidation, players as large as Humana (HUM) have also been considered either a buyer or a takeover target.

Mergers between hospital and outpatient networks such as Tenet and Vanguard may be among the least heralded pieces of industry consolidation.

According to an August 2012 interview with Marc Cabrera, head of the healthcare investment banking practice at Morgan Joseph TriArtisan, physician practices and hospital networks have been undergoing a rapid consolidation, however, such mergers often aren't market moving news.

Recent deals like dialysis specialist DaVita's (DVA) $4.42 billion acquisition of privately held physician practice HealthCare Partners and health-insurer Humana's (HUM) acquisition of hospital chain Concentra in 2010 highlight how healthcare sector players are scaling their operations, noted Cabrera in a July 2012 interview with TheStreet.

Tenet's deal for Vanguard, for instance, may just create a twist in the way hospital network consolidation plays out.

Health Management Associates (HMA) had been considered a target of Tenet, however, some analysts have speculated the company's largest shareholder Glenview Capital Management could push for a merger with Community Health Systems (CYH).

Glenview, which has staked billions on investments in healthcare providers and hospitals, is a top shareholder in Tenet Healthcare with a near 10% stake, according to May 31 SEC filings.

Bottom Line: Tenet's deal for Vanguard indicates a continued sellers' market as major healthcare industry players position for 'Obamacare.' Expect continued consolidation among healthcare providers and hospitals.

-- Written by Antoine Gara in New York

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