July 1, 2019
By: PathSOS Team

Hospital Mergers and Acquisition

The world of Healthcare is always changing and makes progress. Combining small hospitals and the growth of big healthcare organizations has been a sustainable trend in the last few years. Like any other industries, the healthcare sector sees its enough share of mergers and acquisitions each passing year.

Mergers and acquisition (M&A) activity is the major ingredient for growth in the healthcare sector. In many cases, Hospital M&A occurs when a small hospital or clinic no longer able to operate on its own, then a bigger organization purchases the smaller provider, enabling it to continue hospital operations. If this acquisition not occurred, patients of the smaller provider will lose care access. This activity has increased significantly from the past decade, with buyers and sellers both looking to create operational, strategic, and financial value. The supply chain is the area that sees a notable impact following a merger or acquisition.

Increase in financial pressures, push providers and even non-provider entities to engage in the hospital merger and acquisition (M&A) activity. Value-based reimbursement, lowering hospital margins, and high healthcare expenses pushing providers to consider new collaborations to achieve efficiency and cost control.

M&A experiences a great deal among the acquired hospitals. With proper consolidation, planning, and execution of this activity, hospitals can experience higher operating margins following the acquisition. In contrast, most hospitals who engaged in mergers and acquisitions that did not meet cost and quality goals post-transaction are the one who did not focus on integration.

The assumption is that with M&A, health system investments in new technologies, equipment quality improvement, ancillary services, or shared services can be widespread across a broader base post this value-based transaction. But M&A will actually achieve these outcomes? The answer is yes: it will—with well-conceived strategic intent and thorough planning and execution.

Hospital M&A shows no signs of slow down. Financial, market, competitive, and regulatory forces are likely to drive further merger. This activity is all set to gain momentum in 2019. For executives, merger and acquisition are the preferred growth plan, while a quarter indicates that organic growth will be the primary approach. Hospitals should carefully consider their merger and acquisition transactions to ensure they provide value to both the organization and consumers in their community.

For a successful merger and acquisition, Hospital organizations should do the following tasks on a serious basis-

1- Create a strategic plan for doing transactions

2- Make clear-cut financial and non-financial goals

3- Make upfront and clean decisions on executive and middle management leadership

4- Align clinical and financial leadership early on in the transaction process

5- Develop best practices for combining an acquired or merged facility


            “Thus, when done well, M&A can achieve valuable outcomes”