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The "next generation" of partnership arrangements between hospitals and health systems

By Kaufman Hall

New Partnerships 2.0

Given rapid changes under way and on the horizon for the nation's healthcare system, most hospitals and health systems are closely evaluating their desired position in the future value-based business model. Nearly 80 percent of hospital organizations are currently involved in or actively exploring partnership opportunities, according to a recent report.1 To meet the various requirements ahead, many providers are pursuing partnerships as a means of building infrastructure, economies of scale, and market essentiality.

While much media and industry attention has focused on traditional healthcare mergers and acquisitions, different types of innovative partnerships have emerged in recent years. In the article, 'New Partnerships 2.0," Kaufman Hall takes a close look at the “next generation” of partnership arrangements between hospitals and health systems. Many of these new relationships are among organizations that historically were competitors. Partnership models described in this article include:
  • Purchasing and “Best Practice” Collaboratives
  • Management Services Agreements
  • Accountable Care Collaboratives
  • Health Plan Co-Ownerships
  • Joint Operating Agreements
These models are at the “low end” of the integration continuum, where organizations typically retain their current governance and control structures, but collaborate on a selected group of common objectives. In some cases, hospitals and health systems are entering into these relationships with the thought that they could evolve into a more integrated partnership in the future, after “testing the waters” for cultural compatibility and organizational congruence. Other organizations enter into these agreements as a way to achieve some of the advantages of a fully integrated partnership, without giving up their independence.

One common factor among these different types of partnerships is the close geographic proximity of the member organizations. Being located near one another reduces logistical challenges and makes it easier for partners to derive financial value and greater synergies. Neighboring organizations typically are familiar with their potential partner and often serve the same or similar patient populations. Over time, such partnerships establish a potential platform for wider geographic, or even statewide, networks. Form must follow function in any partnership. The structure of the arrangement must be driven by the goals and objectives of the organizations. To achieve success, the partnership design must align with the long-term vision of the organizations involved.

About Kaufman Hall

At Kaufman Hall, we believe that sustained success is never an accident. It is the result of sound decision-making, based on data-driven analysis and disciplined thinking, guided by the fundamental principles of corporate finance. Kaufman Hall is a leading provider of M&A advisory services to the healthcare industry. We have been the advisor for hundreds of mergers, acquisitions, and partnerships, and our expertise includes sell-side and buy-side advisory, joint ventures, valuations, and fairness opinions. Our experience spans all types of healthcare organizations and a broad range of transaction structures. We help clients achieve their partnership objectives through thorough education and planning, identification and exploration of a wide range of options, and methodical transaction execution. Kaufman, Hall & Associates
5202 Old Orchard Road, Suite 700
Skokie, IL 60077 847.441.8780
Email: kkamholz@kaufmanhall.com
Web: www.kaufmanhall.com

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