3 keys to executing a successful hospital merger

With mergers and acquisitions (M&A) increasingly prevalent in today's healthcare industry, an article from Becker's Hospital Review offers tips on how to navigate a deal successfully.

While some experts maintain that hospital mergers have historically failed to reduce costs and provide better care for patients, the trend is hardly slowing down, with analysts predicting that ICD-10 and the challenges of providing rural healthcare will continue to drive much of the industry toward M&A, FierceHealthFinance reported.

Successful hospital realignments, however can have the benefits of enhancing care access and value as well as improving operating efficiency, according to FierceHealthcare.

With that in mind, here's three key factors that Becker's indicates can make or break a deal:

  • Financial stability. In particular, organizations must evaluate whether their target acquisition is in a "turnaround situation" that could require significant investment to complete. Health IT and EHR systems are also a major financial factor to consider, according to Becker's.

  • Strategic factors. Put simply, will the deal result in better quality of care and the health system's ability to compete in the market? Do the priorities of all involved parties align?

  • Cultural cohesion. "No partnership, affiliation or merger will succeed if the corporate cultures are incompatible," Victoria Poindexter, principal at H2C, a strategic advisory and investment banking firm, told Becker's. Factors such as a hospital's religious affiliation and values, as well as the ability of the parties' C-suite executives to effectively work together, can determine whether a deal survives.

From a legal standpoint, health systems pursuing M&A must also keep in mind the risks of running afoul of antitrust and anti-kickback laws, FierceHealthFinance previously reported. To mitigate these risks, executives must take care to ensure the transaction is compliant with federal law as well as state fraud and abuse laws, which can vary widely.

After a deal has been completed, the work for leaders is far from over, according to Becker's Emphasizing the important of communication and transparency, the article notes that both indecision and delay on the part of management can quickly torpedo the effectiveness of a merger if allowed to take hold after the deal.

To learn more:
- read the article