With the healthcare industry riding the biggest merger wave since the 1990s, independent hospitals need to consider whether affiliating with another hospital or health system will help them thrive in a new healthcare environment.
Hospital leaders can look for five indicators to determine if it's time for their independent facilities to find a partner, according to an article in Healthcare Finance News. Those signs include:
1. Unyielding financial struggles
By merging with another facility or system, independent hospitals can save millions of dollars on billing, purchasing and other back-office costs, Barry Ostrowsky, president and CEO of New Jersey's Barnabas Health told The Star-Ledger. Barnabas recently took over Jersey City Medical Center.
2. Lack of market share
After a hospital affiliation or merger, the new, larger organization will have increased market share and a better ability to attract patients. "You can demonstrate to the market, 'We're a commodity,'" Daniel Varga, M.D., chief clinical officer and senior executive vice president of Texas Health Resources, told the Dallas Business Journal. "We're big enough, we're strong enough, we can deliver a really high-quality product to you as an acute care hospital vendor,'" he said.
3. Declining utilization and financial performance
Greater size and economies of scale can help hospitals standardize operations to save money and improve care. Such was the case for Medical City Children's Hospital in Dallas, which is part of Nashville-based Hospital Corporation of America, the Dallas Business Journal reported. "It's about taking and saving dollars in areas where there's not really value to the consumer and putting those in a place where there is value," said Medical City Children's CEO Keith Zimmerman.
4. Minimal negotiating power with insurers
As a January article from consulting firm Alvarez & Marsal showed, healthcare consolidation comes with strong pricing power and higher reimbursements. Hospitals that team up can reap bigger payments from both Medicare and private insurers, FierceHealthcare previously reported.
5. Inability to pursue new opportunities.
For Chester County (Pa.) Hospital, its planned merger with the University of Pennsylvania Health System will enable Chester County to bring in new programs and technology, the Philadelphia Business Journal reported. Similarly, hospital mergers in Washington State have led to renovations, expansions and other improvements, such as Jefferson Healthcare's new state-of-the-art electronic medical record system after joining the Swedish Health Network, according to the Puget Sound Business Journal.
For more:
- read the Healthcare Finance News article
- check out the Star-Ledger article
- here's the Dallas Business Journal article
- read the Philadelphia Business Journal article
- check out the Puget Sound Business Journal article