Acquisitions Dissolving, And When A Deal Is Not A Deal
For some reason, there appears to be a lot of recent media interest in the hospital M&A market, with the belief that hospital mergers are increasing. The reality, however, tells a slightly different story. Part of the hype also involves a misunderstanding of what is really going on when various hospitals and health systems make their announcements.
In the case of transactions between not-for-profits, the decision is often a multi-stage process, starting with the decision to talk, usually about affiliating or partnering, then a formal letter of intent to take it to the next level, Perhaps it was the hot summer that did it, or more realistically the presidential campaign and all the uncertainty around it, especially with regard to the acrimonious debates on health care policy, reimbursement cuts, controlling health care costs, who should pay for the uninsured and how, and everything else that can be thrown in for the talking heads on a daily basis. Perhaps it was the looming tax on medical device sales that resulted in a sharp drop in medical device M&A in the third quarter, a sector that has otherwise consistently been one of followed many months (or a year) later with the formal agreement signed.
It is that formal agreement that is subject to so much misunderstanding. Sometimes the transaction involves an acquisition of one party by the other, or a merger between two not-for-profits, but many other times the end result is a collaboration, an affiliation, a strategic partnership or simply becoming part of a network, meaning doctors can share information and patients can have better access to medical resources from all members of a network. A case in point is what the Mayo Clinic Care Network has been doing, when it added Evanston, Illinois-based NorthShore University HealthSystem to its “network” in September, together with Dartmouth-Hitchcock Health in New Hampshire last July.
These were not mergers or financial affiliations, merely an opening of communication and access to medical resources for the benefit of all. Other examples include the affiliation between St. Joseph Health and Hoag Memorial Hospital in California, where both entities will retain their faith affiliations, Catholic and Presbyterian, respectively. Another example is the very recently announced joint venture that will be teaming up Community Health Network and St. Vincent Health, both in Indianapolis, Indiana, with the six hospitals that make up the Suburban Health Organization outside the city, to form an “accountable care consortium” to focus on innovative health care solutions for employers and commercial markets. Hospitals all thought that with more than 30 million additional people becoming enrolled in some sort of health insurance (if you really want to call Medicaid a real health insurance plan), the revenues would be rolling in…………Want to read more? Click here for a free trial to The Health Care M&A Information Source and download the current issue today