In 2014, the driving factor for mergers is creating clinically integrated care delivery networks and laying the groundwork for population health management, according to the HFMA's Acquisition and Affiliation Strategies report, which drew on a series of interviews the organization conducted earlier this year.
Moreover, systems want strong partners and have less interest in acquiring struggling hospitals. They're also increasingly interested in combinations that don't involve a formal ownership change but rather merging back-office functions to achieve economies of scale. These looser alliances also are less likely to raise competition concerns because they don't involve joint negotiations with payers.
And because more care is being delivered in an outpatient setting, inpatient capacity is not the most important asset in a deal, the report found.
“Most communities have an excess of inpatient capacity,” said Jeff Hoffman, a senior partner at management consulting firm Kurt Salmon. “The path to success, we believe and our clients are looking for, is we have to create a better system of care. We have to deliver the right care at the right time, in the right place.”
An ideal partner would be one that already formed an integrated delivery system, with electronic data capabilities and a network of physicians, said Hoffman, who was not involved in the report.
“They're looking for a partnership for strategy and skill,” he said. “We're not gluing together systems that don't already fit inside a system of care.”
Modern Healthcare's first quarter M&A Watch similarly found that the prevailing story this year is no longer about struggling hospitals looking for a capital injection. And that's making for choosier sellers and buyers that need to present a compelling case for clinical integration.
Nontraditional tie-ups continue to remain strong, with less weight given to whether a partner is investor-owned or not-for-profit, HFMA's report found. Yet religious affiliations can remain a barrier to alliances, the report said, particularly when the system follows the Ethical and Religious Directives for Catholic Healthcare Services. It cited Dignity Health's 2012 decision to shed its former Roman Catholic identity, which gave it more flexibility for acquiring secular hospitals.
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