HFMA: Financial need no longer driving hospital M&As

Financial need is no longer the primary driver for many hospital mergers, acquisitions and affiliations, the Healthcare Financial Management Association (HFMA) announced at its annual national institute conference in Las Vegas.

HFMA conducted the research earlier this year, interviewing officials with such providers as Park Nicollet Health Services, Dignity Health and AllSpire Health Partners.

"Around 2009, we saw the rationale for acqusition and affiliation activity change," Kit Kamholz, a managing director for consulting firm Kaufman Hall, said in the report. "Organizations became more interested in bolstering their physician platforms, driving quality initiatives, lowering costs, improving IT foundations and enhancing their brand."

M&A activity in healthcare has been fairly robust in recent months, but those engaging in a merger, acquisition or affiliation should be cautious about the associated risks and rewards and closely evaluate the state of the market in which the entities operate.

According to the HFMA data, efficiencies and economies of scale were cited as the most important driver of affiliations and deal-making by 58 percent of respondents, followed by improved and sustained competitive position (51 percent), and physician network and clinical integration (35 percent). Access to capital was listed as the most important factor by just 23 percent of the respondents.

Nearly two-thirds of respondents said that restructuring of costs was the biggest expected improvement as the result of a merger or affiliation, followed by patient population data analytics (57 percent) and management of the care continuum by physicians (57 percent).

Moreover, any M&A strategy should be value-focused; new organizational combinations are being considered (e.g., academic medical centers teaming up with regional health systems); and many organizations are pursuing a variety of partners simultaneously, seeking one that best fits their needs.

"Affiliations that prove the value for patients and other care purchasers are likely to be well received," HFMA Chief Executive Officer Joe Fifer said in a statement.

For example, Dignity Health, the San Francisco-based not-for-profit hospital system, has overcapacity in its inpatient beds, but can still find complementary assets by reaching out to other provider partners. "Most hospitals come with other assets, such as a physician network," said Peggy Sanborn, Dignity's vice president of partnership integration, in the report.

To learn more:
- read the HFMA report (.pdf)
- here's the statement