Healthcare Mergers and Acquisitions

Business

  • Author Lilly Stevens
  • Published January 10, 2020
  • Word count 519

Healthcare acquisitions and mergers are not the same types of mergers one sees in typical business spheres. Although the generalized terms can be applied, healthcare is much more complex, has different goals, and has a lot more diversity that needs to be addressed. Let’s look at some of the types of mergers you may hear about in healthcare transactions, and the motivation behind them.

Hospital Mergers

It is becoming increasingly popular for similarly sized healthcare facilities to join forces under a new brand. This helps to lower operating costs, which is important as health care strives toward a value-based system. However, there is concern as to how these merged entities, especially as more and more facilities do these mergers, are going to be able to service their communities. What impact will this larger facility have on quality of care, and patient costs?

For example, in 2017, two major healthcare systems that both operated country-wide in the United States, merged. It was a massive deal financially, and brought 139 hospitals and another 700 care facilities under one shared corporate umbrella. The concern is how these facilities will be run and be effectively managed with such a vast network to oversee (spread out all over the country).

Hospitals Acquire Private Practice

Another trend being seen in North America is hospitals acquiring private practices. Essentially this gives major hospitals countless satellite facilities in which they can insert their services deeper into communities. It certainly makes things more convenient for the population, and as of 2016, almost 30 percent of physician practices were hospital owned – a number we can only assume has increased since then.

Previously, healthcare in the United States was based on a volume model – the more patients you see the more money you make. However, there is a clear shift in the medical landscape that is urging providers to develop care plans for patients (start to finish) that are reasonable and responsible financially for the entire patient population. Merging private practices into hospitals helps providers have better access to patient files, and therefore gives them a better picture of their treatment history. This can prevent costly and unnecessary procedures and diagnostics from being performed. Again, the types of mergers and acquisitions you end up seeing in healthcare are fueled by the end goal.

Above all, the goal is to improve patient care, and the ways to achieve that are by making it more affordable, reducing unnecessary (or duplicated) care, and ensuring patient care plans are seen through. Achieving all of these goals can be done through mergers and acquisitions, by making a more universal and accessible patient medical database that providers under the same healthcare entity can access.

Reducing operating costs is also significant. The less it costs to run facilities and programs, the easier it is to reduce costs on the patients’ side of the equation.

The Federal Trade Commission

There is some concern, because healthcare organizations can be so large, that mergers can produce major monopolies. Needless to say, the Federal Trade Commission is very aware of this and blocks the deals that threaten to create monopolies.

A New Future for Healthcare

This type of mergers and acquisitions is signaling a major change in how healthcare is provided in the United States, but also about how the focus is shifting. Realigning healthcare values to better serve the patients and create more sustainable healthcare models is a fundamental driving force behind all healthcare-related mergers or acquisitions.

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