As 2017 comes to an end, we thought it would be helpful to The Governance Institute membership to provide some observations regarding the state of health system merger and acquisition (M&A) activity, and specifically its impact on independent non-profit hospitals.

First, the industry remains among the most fragmented in the U.S. economy. It comprises over 6 percent of GDP, is capital intensive, regulated, and complicated. Despite this, there are more than 2,000 “companies” nationally that own and operate the roughly 4,300 acute-care hospitals. As described in our previous article in Hospital Focus,¹ hospitals also operate with significant capital market limitations. These constraints combined with intense industry pressure has proven difficult.

Most health systems are now of the belief that the cost and quality equation could be improved by hospitals organizing into more effective regional networks. This holds the potential to coordinate care, share best practices, raise capital, implement IT systems, recruit physicians, and the like. Our team of investment banking professionals has yet to come across a hospital (whether a large system, prestigious academic medical center, or a small rural sole community provider) that believes they are adequately positioned to contend with the radical economic changes afoot. As one CEO we worked with recently put it, “We’re moving from the horse and buggy to Tesla era overnight.”

Click here to download the full article.

Author: Rex Burgdorfer
Date: December 2017
Source: The Governance Institute

Note: 1. Rex Burgdorfer, “Is Healthcare a Charity, Social Service, or Business? Community Hospital Board Members Contemplate Their Role,” Hospital Focus, The Governance Institute, September 2017.