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10 Sign up for the COMPLIMENTARY Becker's Hospital Review CEO Report & CFO Report E-Weeklies at www.BeckersHospitalReview.com or call (800) 417-2035 Point-Counterpoint: Is the Rush to Hospital Consolidation Rash? (continued from page 1) ture? Particularly problematic is that smaller organizations simply are not going to have the wherewithal to manage transformation." As the debate continues to rage over whether the M&A uptick is good or bad for healthcare, one thing is relatively certain: It's not going away. Data from Irving Levin Associates shows that in 2011, the latest year available, there were roughly 90 hospital mergers or acquisitions — the highest number in the past decade. Here, several healthcare M&A experts and hospital executives try to pick apart what is happening in the M&A market, why it's happening and whether it will benefit the healthcare setting in the long term. Point: Hospital mergers and acquisitions are natural. They are resulting from healthcare reform and could lead to system efficiencies. When President Barack Obama signed the Patient Protection and Affordable Care Act into law three years ago, hospital leaders knew their industry would need to change. The new emphasis on accountable care, preventive measures and population health has led to the creation of accountable care organizations and clinical affiliations — in a way, ACOs and affiliations are soft versions of the M&A market and may be the stimulus to actual mergers. "One of biggest problems in the next five to 10 years is the risk of transforming the culture of healthcare organizations," says Howard Peterson, founder and managing partner of consulting firm TRG Healthcare. "How do hospitals go from fee-for-service to global risk? How do they finance that? How do they change their practices and policies and people and struc- Healthcare reform has not been the only impetus, either, as sequestration and other proposed governmental payor cuts are forcing many hospitals to look for a partner to weather the storm. "It's hard for me to answer whether I see [consolidation] as a positive or negative. I think it's a natural outcome of what we see happening in the industry," says Stephen Kimmel, CFO of Hendrick Health System in Abilene, Texas. "With healthcare reform, sequestration and all of these cuts, as in any other business enterprise, hospital systems are going to look at ways to find efficiencies through scale. I think what you see happening with mergers is a natural result of pressure that's being applied through all of the changes." The efficiencies and economics of scale that Mr. Kimmel mentions are another frequently touted reason behind mergers. If hospitals are able to join forces under one umbrella, work together to buy supplies in bulk, and consolidate the revenue cycle and information technology departments, then consolidation may be a positive move. In addition, small hospitals are suddenly able to access more capital at cheaper interest rates and negotiate better deals with private payors due to the sway of a larger parent organization. "When people look at hospital consolidation within the lens of lowering healthcare costs, there are some that look at it differently," says Brian Sanderson, managing partner of healthcare services for Crowe Horwath LLP, who has worked extensively with academic medical centers and independent hospitals. "It's not about, 'Let's capture more market share.' Hospitals that benefit are more focused on efficiencies, levering purchasing contracts and the actual financial aspects." HFAP 1039_Layout 1 10/4/11 4:05 PM Page 1 True Partnerships. " Our switch to HFAP was seamless. We began with a collegial and thorough survey process focused on quality and patient safety. Our relationship continues to be a cost-effective and educational partnership. " John M. Kosanovich, MD, MBA VPMA / Network Development Covenant HealthCare Saginaw, Michigan www.hfap.org info@hfap.org PUBLICATION: Becker's Hospital Review SIZE: Half Page 4/color APPEARANCE: 2011 Norcom Inc. 847-948-7762 theteam@norcomdesign.com