Hospital mergers not for everyone

Consolidation isn't good business for everyone, a recent PricewaterhouseCoopers report warns. Even though healthcare mergers and acquisitions were up in 2011 with 980 deals worth $227.4 billion, the consolidation approach isn't a one-size-fits-all model.

Even small mergers carry considerable risk, according to the report. Two-thirds of deals do not meet expectations because of overpaying, culture clashes, inadequate due diligence, failure to retain key employees, ineffective communication, excessive debt and extended integration, the report noted.

The PwC report follows last month's study from the U.K., which suggested that despite the trend, hospital mergers offer few benefits. Researchers from the University of Bristol found that hospitals that consolidated in the late 1990s and early 2000s continued to have larger deficits after mergers. Patients even had to wait longer for elective treatment post-merger, and there were few indications that clinical quality improved.

Still, even with cautions against consolidation, hospital mergers can offer advantages, as Justin Matus, an associate professor at Wilkes University in Wilkes-Barre, Penn., and a fellow in the American College of Healthcare Executives, wrote in a commentary in The Times Leader. Matus suggests that the trend of hospital mergers, particularly in the Northeastern Pennsylvania healthcare market, is something to celebrate more than fear.

"Most of these smaller, independent hospitals certainly were well-managed and sufficiently staffed by extremely competent health care professionals; yet, they could not compete and achieve the scale and efficiencies that larger systems could," Matus said. A health system can offer efficiencies and economies of scale, such as purchasing power and centralized support functions in finance, marketing and human resources, to smaller, struggling hospitals, he noted.

Matus continued, "[T]he patient is being so much better served today than even five years ago, and the trajectory remains positive for continued improvement in how we deliver health care, achieving not only quality, but also achieving value by eliminating waste and reducing medical errors."

For more information:
- check out the report (registration required)
- read the article

Related Articles:
New Jersey a hotbed for hospital consolidation
Independent hospitals fight consolidation trend
AHA offers guidance to hospitals on verge of M&As
Healthcare M&A finishes healthy in 2011
Hospital mergers trendy but offer few benefits

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