It’s difficult for small to mid-sized hospitals to compete against larger health systems in many markets, and the depressed economic climate has led some hospitals to seek out opportunities for mergers.
Mark Grube, a partner at Kaufman Hall, a consulting firm based in Skokie, Ill., said he and his colleagues have seen an increase in hospital mergers since the middle of last year, although M&A activity reached “another level” after the financial crisis.
“The industry was ripe for consolidation,” Grube said. “The stand-alone organizations and smaller systems have been hit hard. Weaker organizations may have been pushed into consolidation by the economy, but stronger stand-alones are thinking they might be better served by linking with other organizations.”
In a recent example, the Prince William Health System of Manassas, Va., and Novant Health of North Carolina have agreed to merge. Both organizations are not-for-profit health systems.
Prince William Health System is a small system that includes a 170-bed hospital, while Novant Health is a large integrated delivery network of more than 1,000 physicians and 372 practice locations.
The challenges of being a single-hospital system in a tough economy likely drove Prince William Health System to look for a merger opportunity with a deep-pocketed partner, but Prince William officials say the system remains committed to the local community.
“Serving the needs of the community has always been our top priority and that will not change with the new partnership,” said Michael Dailey, chairman of the Prince William Health System board of trustees. “Prince William will continue to have a board made up of local leaders with deep ties to the community, and local residents can be assured that all donations to (our) foundation will stay in the community.”
Potomac Hospital, another facility in the same area of northern Virginia, also appears to see the economic writing on the wall, and has plans to merge with Norfolk, Va.-based Sentara Healthcare.
“These past few years have been a period in which many hospitals, including Potomac, have experienced economic difficulties,” said William Moss, the retiring president and CEO of Potomac Hospital.
Potomac Hospital, a 183-bed facility in Woodbridge, Va., hopes the merger with the larger health system boosts access to cutting-edge medical technology, making the hospital more competitive.
“A partnership with Sentara is important for Potomac Hospital’s future,” said Marion Wall, chairman of the Potomac Hospital Foundation board of directors.
“By relieving some of the recent economic pressures that hospitals like ours have been experiencing, we can better ensure that Potomac will continue to provide … a source for expert healthcare.”