As the healthcare industry transforms, consolidation, mergers and acquisitions and creative partnerships continue.
"It's just the nature of where healthcare is going, where you're having a convergence of payers and providers," said Bill Baker, lead healthcare partner for KPMG's Transactions & Restructuring practice. "You really need to have scale ... to handle the complexities of where the healthcare model is heading, where providers will be taking on financial risk for the care of the population."
During an executive panel discussion in June at the Healthcare Financial Management Association’s ANI 2013 in Orlando, Fla., panelists addressed the advantages and challenges of maintaining stand-alone status, factors that could influence a decision towards a merger and various affiliation strategies that could be applied if need be.
Many of the challenges stand-alone hospitals around the country have been facing aren’t much different than challenges all hospitals seem to facing said Michael Allen, CFO of Winona Health in Winona, Minn., during the session.
However, he said, stand-alones “… have to be just as good or better than everyone else and if you aren’t, you could find yourself in trouble. Our competitors have a lot of resources and that could be one of our biggest challenges.”
Myron Machula, CFO of Enloe Medical Center in Chico, Calif., said during the session that for many community stand-alone hospitals, it’s gotten to the point where collaborations with other facilities are unavoidable.
“We may have a cancer case that just can’t be helped at our facility. I don’t believe we are at a point where we can avoid looking at other types of collaborations just short of a merger,” he said.
While there are certain advantages to partnering with larger healthcare organizations, especially as the healthcare world continues to evolve heading into 2014, there are numerous reasons why smaller, stand-alone hospitals are important to communities, said Harold Dupper, vice president of finance at Platte Valley Medical Center in Brighton, Colo.
Among those reasons is what patients want from their healthcare providers.
“I think that healthcare in America is still a personal preference and many prefer to have a personal connection with their providers,” said Dupper. “I think we can provide the certain kind of service people are looking for.”
But mergers and acquisitions are just one option. Providers – and payers – are getting creative, sometimes carving out arrangements that allow each participant autonomy while offering to the other something that is needed.
“We’re starting to see now that organizations are looking at their goals and objectives and what they’re trying to accomplish,” said Kit Kamholz, managing director of consultant firm Kaufman Hall during a presentation at HFMA’s annual conference. “If there is a specific element or a specific need, we’re starting to see partners align around that particular need and create unique relationships to solve those particular problems.”
Strategic rationales include an increased focus on branding and regional coverage; concerns about narrow networks; greater understanding of goals and objectives and what is needed to meet them; and patient population management.