6 of the biggest segments in healthcare M&A

Mergers and acquisitions generally occur because organizations want to become bigger or they want to acquire capabilities that will make them more effective, but no matter what the reasons for the transactions, they aren't simple.

"Consolidating a healthcare organization is a big deal. There's a lot of change that has to be thought through regarding impact on people's lives," explained Doug Fenstermaker, executive vice president of healthcare for Warbird Consulting Partners, a professional services firm with a focus on healthcare financial management. "Organizations and infrastructures have failed because they didn't think through these integrations," added Fenstermaker's colleague Jim Fox, director and senior CFO consultant.

Fenstermaker and Fox gave Healthcare Finance News this list of six types of M&A occurring around the nation right now in order of significance.

1. Hospital-to-hospital integration.

Many hospitals are trying to figure out how to be more regionalized with their delivery of care. With multi-hospital systems not all services will be available everywhere. "Some services may be better suited centralized in one facility to get the most economy of scale/quality of care," said Fenstermaker. Consolidating clinical services reduces the amount of cost – like distribution services – a hospital has.

2. Clinic-to-hospital integration.

The allure of the independent doctor is going away. Physician clinics are becoming absorbed by larger hospital systems. Doctors are leaving independent practices (and operational overheads) to become primary care physicians solely or to focus on areas of specialty, and they want to become part of a larger system when they do.

3. Physician-to-physician integration.

Some larger physician clinics are integrating with other physician clinics. "Those organizations with 300 doctors are getting their economy of scale relative to their size. But they're opening up to smaller clinics and working out relationships based on partnerships with insurers or surrounding area hospitals," said Fox.

4. Hospital-to-doctor clinic integrations.

Doctors are joining hospital systems. They're becoming part of multi-state organizations where systems have restructured health plans, or are acquiring/expanding health plans to large health insurers. "Sometimes," Fox said, "they're outright merging to become big integrated delivery networks."

5. Joint management companies

Management services organizations (MSOs) are reaching out to smaller organizations to give them an opportunity to participate with larger systems without necessarily being acquired or controlled. "Not everyone wants to be part of a big organization. They want to retain their independence, but have an affiliation with an organization that has resources and strategies. So, these MSOs provide services and capabilities small organizations may not normally have access to," said Fox.

6. Payer acquisitions

There's a movement for consolidation happening on the payer side, too, with both bigger groups and payers acquiring physicians. "This has some hospital systems concerned about payers who have a lot of capital on their balance sheet," said Fenstermaker. "They could be come a very disruptive force in the relationship between physicians and hospitals."

Source: healthcarefinancenews