Strategic concerns drive healthcare M&A
Alternative strategy is "value-focused acquisition and affiliation," geared toward improving the quality or cost-effectiveness of care
Health system acquisitions and affiliations are being driven more by strategy than by financial need, according to survey research released Sunday at the Healthcare Financial Management Association’s 2014 National Institute in Las Vegas.
The results of the 2013-14 survey suggest that the hospital acquisitions trend may be “shifting toward mergers and acquisitions that take place between financial equals,” as opposed to more traditional acquisitions in which a weaker healthcare system is acquired by a stronger one.
[See also: The big themes at ANI 2014.]
The survey findings are detailed in the report Acquisition and Affiliation Strategies, which was based on a series of interviews conducted by HFMA in early 2014. HFMA received 145 total responses to a survey sent to a random selection of senior financial executive HFMA members in October 2013. Fifty percent of respondents represented stand-alone hospitals, and fifty percent represented health systems (20 percent at the system headquarters level and 30 percent at the system facility level).
The HFMA report calls the alternative M&A strategy “value-focused acquisition and affiliation,” geared toward improving the quality or cost-effectiveness of care, as opposed to dominating markets.
The survey suggests several “defining characteristics” of acquisition and affiliation activity in the current marketplace:
- Key drivers include improving operational efficiencies, creating clinically integrated care delivery networks, and accessing sufficient populations for population health management.
- Many acquiring organizations are not interested in adding acute inpatient capacity. As a result, the other assets a hospital-based system can bring may be equally or more important than the hospital itself.
- Financially troubled hospitals are becoming less attractive acquisition targets.
- For affiliation and acquisition purposes, the distinction between not-for-profit and for-profit status is lessening in importance, although religious affiliations of not-for-profit systems still pose roadblocks for some partnerships.
- Some organizations are pursuing innovative models that are characterized by the parties involved as combinations rather than mergers.
HFMA profiled a variety of health systems in the report, including AllSpire Health Partners, with facilities in Pennsylvania and New Jersey; California-based Dignity Health; Froedtert Health in Milwaukee, Wis., and the Medical College of Wisconsin; and Minnesota-based Health Partners and Park Nicollet Health.