Issue link: https://beckershealthcare.uberflip.com/i/324690
52 Transaction & Valuation Issues H ospital boards sit in a precarious situation today: Sit idle during the waves of healthcare reform, or move aggressively to look at partner- ships with other institutions. While there is no one right answer, hospital and health system leaders have to at least comb through the top healthcare transactions trends and issues and figure out where their organization sits in their respective market. For boards that have decided to take the plunge, here are nine thoughts that must be considered. 1. It is difficult to determine the exact time to start a transac- tion. There is never a perfect time to enter the M&A market, but there is a bad time. It may behoove hospital boards to consider transactions while they are still healthy instead of waiting until the organization's finances begin to falter. Once a system or hospital is struggling, it will have less negotiat- ing power, and it can be difficult to find a partner. Some recent examples of self-described "healthy" systems that have been proactive in partnership talks include Jameson Health System in New Castle, Pa., and Community Memo- rial Healthcenter in South Hill, Va. 2. A hospital system has to cast a broad net when looking for buyers. In some instances, board members may prefer to only hold affili- ation discussions with two or three preferred partners. However, in almost all circumstances, a board is better off looking at a wide list of potential suitors. It's not uncommon today to see the most successful transactions include eight to more than a dozen interested parties. A larger array of choices will allow hospital board members to have more leverage in choos- ing the right partner. 3. Similarly, board members should leave their biases about spe- cific buyers at the door. Hospitals should consider all interested buyers and not limit their field too closely. Board members may have preconceived notions of partners who will be "good" or "bad" for a system, but those biases are better left checked at the door. Today's era of healthcare reform requires hospitals to consider aligning their goals with all providers that are willing to make the right investment. The partner they may have the preconceived bias toward may be the right strategic partner for them. 4. An investment banker is becoming a must. This past January, PinnacleHealth in Harrisburg, Pa., and Penn State Milton S. Hershey (Pa.) Medical Center announced investment banking firm Cain Brothers would advise on their pending affiliation. These types of moves have become more commonplace in the hospital sector, as transactions have become so com- plex that they often need an investment bank, notwithstanding the fees that 9 Things for Hospital Boards to Consider in Transactions By Scott Becker, JD, CPA, and Bob Herman