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Impact of Healthcare Mergers and Acquisitions

Healthcare M&A Results in Fewer Hospitals, Ongoing Issues

As headlines announce the consolidation of yet another hospital system in America, some experts say the wave of mergers and acquisitions is the fallout from healthcare reform, reduced reimbursement rates, aging baby boomers and overweight Americans. Others think it is an industry revamp that is long overdue. No matter what anyone believes, consolidation does not appear to be going away anytime soon.

Healthcare M&A revved up in 2012 and continues to register new deals across healthcare segments. As more U.S. hospitals turn to consolidation to survive, leaders have to juggle new day-to-day priorities. Online MBA programs offering a healthcare management specialization teach students practical strategies to deal with the changes facing healthcare management.

Fewer Players, Higher CEO Turnover

Certain healthcare segments suffer from a lack of professional participants, so when one service provider secures these workers, other providers face even fewer staffing options. Hospitals are juggling new payment models such as fee-for-service to take care of certain populations that these shortages affect. For these hospitals, healthcare trends are now a reality. Caring for patients means financial risk.

A report by the American College of Healthcare Executives dated March 5, 2015 indicates a 2 percent drop in CEO turnover. In 2014, this rate was 18 percent, down from the record high of 20 percent in 2013. According to Deborah J. Bowen, FACHE, CAE, ACHE’s president and CEO, “As our data show, elevated turnover among hospital CEOs seems to be a feature of the current healthcare environment. The continuing trend of consolidation among organizations, the increasing demands on chief executives to lead in a complex and rapidly changing environment, and retirement of leaders from the baby boomer era may all be contributing to this continuing higher level of change in the senior leadership of hospitals. The findings also serve as a reminder for healthcare organizations to continue to ensure they have appropriate strategies in place — including robust succession planning — to successfully manage senior leadership changes.”

Healthcare M&A Does Not Always Work

Seventy percent of mergers do not work, according to a McKinsey document cited in a Jones Lang LaSalle report by Jason J. Clark titled “Survival of the Fittest: In a complex landscape, only the strong survive.” This statistic spans all sectors, not just healthcare. One reason consolidation does not always generate better results is due to occupancy costs. JLL’s report urges hospital managers to calculate the terms of all leases before reaching a decision to merge. Healthcare M&A requires extensive due diligence.

Savvy Consumers

Consumers are savvier today than they have been in previous generations, which is a healthcare trend that requires health systems to market themselves much more effectively. Points of differentiation in healthcare services are essential to attracting and retaining customers and patients. Consumers are learning the ins and outs of healthcare exchanges and want the most for their premiums; further, technology and social media are factors that healthcare providers must consider as consumers shop for the best service.

Turn to an Online MBA Program

An online MBA with an emphasis in healthcare management gives students current information about America’s healthcare system, while contextualizing the state of the field with historical information and other healthcare facts. While new deals and healthcare trends will continue, students can take advantage of an online MBA program to navigate the challenges of healthcare M&A.

Learn more about the UT Tyler online MBA in Healthcare Management program.


Sources:

American College of Healthcare Executives: Hospital CEO Turnover 1981-2015

Jones Lang LaSalle Report: Survival of the Fittest: In a complex landscape, only the strong survive

Forbes: Healthcare M&A: The True Diagnosis

Fortune: Behind Healthcare’s M&A Boom


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