Publications

What Today’s Hospital Leaders Can Learn From ‘Downton Abbey’

Downton Abbey - March 2016In its final season, “Downton Abbey” captured audiences by exploring a healthcare phenomenon set in rural England 100 years ago — and one still playing out across America today.

The phenomenon is hospital consolidation, and historical period drama “Downton Abbey” tackled it with the same gusto with which it took on the deterioration of class hierarchies, the emergence of the women’s liberation movement and many other social issues over six critically acclaimed TV seasons.

At the beginning of the 20th century, hospitals in both England and America were much different places than they are today. They offered basic nursing services to keep patients as comfortable as possible and not much more. These institutions were most typically standalone facilities largely underwritten by local philanthropists.

During this period, modern medicine began to take hold. Sophisticated organizations, often associated with universities and generally in urban areas, began to adopt new ‘technologies’ like operating rooms, pathology, electrocardiograms, X-rays and others. These advances changed the nature of hospitals and healthcare. Hospitals shifted from warehouses for recovery, and often decline, to early examples of what hospitals became in the

March 17th, 2016|M & A, Publications|

Responding to the HIT Imperative: A Guide for Independent Hospitals

Responding to the HIT ImperativeIndependent hospitals and small health systems face a daunting challenge in developing their healthcare IT capabilities to meet the requirements of value-based care. But they must carefully weigh their options and proceed cautiously in meeting that challenge.

Health systems that lack the financial wherewithal to develop an electronic health record system on their own, and that are seeking an alternative strategy, should keep in mind five lessons learned by organizations that have faced a similar challenge:
> Review the full range of options.
> Be realistic; Acknowledge the importance of strong management.
> Adhere to a budget.
> Reach out to peers.
> Be wary of competitors’ offers to help.

Click here to download the full article.

Author: Rex Burgdorfer, Jeff Simnick
Date: February 2016
Source: HFM Magazine

February 1st, 2016|M & A|

Affiliations: Matching Objectives and Risks

Affiliations_Matching Objectives and Risks - January 2016Affiliations are contractual arrangements between two or more hospital partners in which they agree to work together on projects. No ownership or control is exchanged in affiliations; however, the term is sometimes used euphemistically, or incorrectly, to describe business combinations. These sorts of agreements have existed for many decades as non-profit hospitals have pursued contractual approaches to improve qualitative, operational, or financial performance. Most often, they represent an effort to share ideas and resources with an objective of economic efficiency and improved health while remaining independent.

Non-profit hospitals are actively considering their strategic financial options due to the economic and medical care implications of the Affordable Care Act (ACA). This activity has not, at least to the present, resulted in a meaningful increase in the number of completed business combinations. It has, however, resulted in a sharp increase in the number of affiliations that are being entered into. Despite the scant empirical support and bubbly atmosphere behind many affiliations, independent hospitals are actively pursuing them in an effort to access the benefits of increased scale without ceding ownership.

Because

The Hospital Joint Venture Handbook

The Hospital Joint Venture Handbook

This joint venture handbook is based upon a series of articles that we began writing for The Governance Institute in the summer of 2014. One year later, many of the “new frontiers” in hos­pital joint ventures that we outlined have continued to evolve at a rapid rate, and new forms of creative partnerships are announced on a regular basis. We hope that this handbook will serve not only as a marker of a unique time of change in the hospital space, but also as an inspiration for further creativity as health systems around the country endeavor to deliver services in an efficient and patient-centered way.

Click here to download the handbook.

Authors: Barry Sagraves, Juniper Advisory; Ken Marlow, Waller
Date: January 2016
Source: The Governance Institute

 

3 Compensation Structures for a More Successful Transaction

Three Compensation Structures for a More Successful Transaction CoverEighty-seven percent of hospitals are considering alignment with another hospital or system as a part of their overall strategic planning, according to Dixon Hughes Goodman. This interest is primarily attributed to structural factors in the industry, including the shifting reimbursement environment and issues related to new healthcare regulations that place independent hospitals at a competitive disadvantage.

The business of governing acute care hospitals and health systems has become increasingly complex.

At the same time, there is tremendous opportunity due to the expanding range of strategic alternatives available to independent hospitals. Despite these market realities, many boards have failed to implement protective structures that incentivize senior management to objectively assess opportunities free of personal contractual distractions. This article reviews the types of safeguards that hospital system boards should have in place to promote senior management objectivity.

Click here to download the full article.

Authors: Jordan Shields & David Gordon, Juniper Advisory; Jeffrey M. Peterson, McGuireWoods
Date: November 2015
Source: Becker’s Hospital Review

November 11th, 2015|M & A|

Building a Hospital Joint Venture: A Blueprint for Success

Building a Hospital Joint VentureThis is the third and final article in a series examining the uses of health system joint ventures, the process of developing a joint venture, and expected trends related to these transactions.

In the first two articles, we looked back into the history of joint ventures (JVs), the factors leading to their emergence, and the potential benefits of a JV to a non-profit hospital or health system. We then looked at emerging trends in JVs and speculated as to the future directions that these models could follow to solve for rapidly evolving healthcare challenges. In this article, we will explore the “nuts and bolts” of considering and creating a hospital JV, which will allow us to bring the hypothetical and theoretical into the practical. If you are a hospital or health system considering forming a JV, there are some important factors to think through before embarking on this complex process.

Click here to download the full article.

Authors: Barry Sagraves, Juniper Advisory; Ken Marlow, Waller
Date: May 2015
Source: The Governance Institute

Continuing a Non-Profit Hospital’s Charitable Mission through Mergers and Acquisitions

Continuing a Non-Profit CoverBusiness combinations between acute care non-profit hospital companies continue at a pace not seen since the 1990s. Participants are proactively entering the market for corporate control in an effort to forge partnerships that will position them to be successful in the future era of healthcare delivery.

This is not just a response to “Obamacare” or healthcare reform, but rather, critics say, is reflective of a system that delivers mediocre quality care at a high price, compared to other industrialized countries. Some cite the level of ownership fragmentation as one of the leading causes. Improving a hospital’s root business fundamentals is more often the impetus for considering consolidation opportunities rather than the broader policy issue.

The 2000s were dominated by two trends: first “the bear hug” and second “the need for capital.” “The bear hug” is a common phenomenon whereby small Hospital A prematurely arrives at the decision that it makes sense to combine with Hospital System B, usually the closest sizable partner. While this conclusion is a natural inclination of the board, experience has shown that such outcomes are less favorable to Hospital A than for Hospital System B. Absent

April 1st, 2015|M & A|

Assessing Independence

Assessing Independence CoverSeveral recent surveys indicate that nearly 80 percent of non-profit hospital boards are assessing their independence. This means they are determining whether to affiliate, combine, or remain independent. Only 15 percent of boards were considering this a few years ago. This is the Affordable Care Act’s (ACA) greatest impact on non-profit hospital boardrooms today, and much more so than the “flood” of mergers widely described in periodicals.

In September 2014, a New York Times article described the FTC’s wariness of mergers amongst hospitals.¹ In this, an economist suggested that the ACA has “unleashed a merger frenzy” and that she saw antitrust enforcement as a tool to slow the “march toward conglomeration.” Perhaps these assertions were intended to be forecasts. In any event, they are very common misstatements. In fact, mergers are being completed at a tepid rate of 70 to 80 small transactions per year, far below the annual rate of nearly 150 in the early and mid-1990s. The hospital industry remains the most fragmented major industry in the U.S.

This article focuses on the disconnection between the much-discussed and presumed impact of the ACA, or the “merger frenzy,” and

January 15th, 2015|Role of the Board|

New Frontiers in Hospital Joint Ventures

New Frontiers in Hospital Joint VenturesThis article is the second in a series examining the uses of joint ventures, the process of developing a joint venture, and expected trends related to these transactions.

In our first article, we examined the history of joint ventures (JVs) and summarized some of the potential benefits to a non-profit hospital or health system considering a JV.

In this article, we will speculate as to the directions this flexible yet complex organization structure may take in the future and solutions it may provide to the healthcare industry. We will also cite some recent examples of joint ventures and other affiliations and assess the circumstances under which success is more likely than not.

Click here to download the full article.

Authors: Barry Sagraves, Juniper Advisory; Ken Marlow, Waller
Date: November 2014
Source: The Governance Institute

November 13th, 2014|Transaction Structures|

The Rise of the Hospital Joint Venture

Rise of the Hospital Joint Venture CoverSince the enactment of the Affordable Care Act in 2010, more and more hospitals and health systems have entered into some sort of affiliation, whether through acquisition, membership substitution, joint venture, or clinical affiliation. This trend is a result of the mounting pressures hospitals and health systems face in the current healthcare environment. Yet, fundamental change in the makeup of the hospital market also paves way for innovation, which includes new ways that organizations may partner to confront these challenges. The joint venture structure is one such innovation.

For those hospitals and health systems that are financially sound and have sufficient capital, entering into an affiliation allows them to best position themselves for future success—to thrive rather than just survive. Evaluating strategic alternatives from a position of strength allows the board of a hospital or health system to take its future into its own hands and identify affiliation partners that complement and enhance its operations, capitalization, compliance, and quality functions. Exploring a range of joint venture alternatives has been found by many systems to be a “best of both worlds” approach—combining the installed market presence and

September 15th, 2014|Transaction Structures|