Integrating for mutual gain

Health care industry consolidation

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EY - Health care industry consolidation - Chip Clark, Gregory Park and Gregg Slager

In the post-reform world, health care organizations are looking beyond the realm of traditional mergers and acquisitions to a variety of innovative structures.

The goal is to collaborate with other complementary organizations in achieving an integrated system of care, extending reach to provide needed services in their communities. Rather than maintaining traditional designations as providers or payers of health care, and for-profit or not-for-profit entities, health care enterprises today are transcending boundaries to move toward innovative combinations in health care.

Considerations for your board and executive leaders

For all health care organizations

  • Has your organization assessed its current market position and determined what other types of health care organizations would best complement current services, strengths and opportunities?
  • When considering an acquisition, have you assembled an appropriate due diligence team, consulting with outside advisors as needed, to carefully assess the potential fit of the target with your organization, and to ensure that key stakeholders in both organizations are involved in assessing the cultural fit of the two organizations?
  • When considering a transaction, does your organization designate an individual to lead transaction efforts? Do you have an integration plan in place at the outset of due diligence to ensure the value of the transaction is maximized?

For providers

  • Have your board and executives asked the hard questions — identifying your core competencies, questioning the need to maintain your current scope of services and assessing the financial feasibility (along with community need) of maintaining certain services, as well as the need to strategically acquire strength through some type of collaboration with other organizations to meet the challenges of the future?
  • If acquisitions have been completed outside the core competencies of your organization, have you put skilled management in place with experience in the new sector?

For payers

  • Has your organization carefully assessed its best strategic moves to manage the risks and rewards of value­based care, patient-centered homes and ACOs? Are acquisitions of health care providers (hospitals or physicians) a positive strategic move to strengthen your position by managing your own integrated network?
  • If your organization is considering acquiring (or has already acquired) physician groups or hospitals, has your management and operational structure been carefully assessed to make sure the best people are in the right positions to successfully manage the payer and the provider aspects of your organization? Have you carefully structured provider operations to limit fallout in negotiations with other providers in your markets?