The single stand-alone hospital may be a “concept of the past”, John Reiboldt, managing director of Coker Capital Advisors, told an audience at the HIMSS11 conference in Orlando, Fla., yesterday.
In an education session titled “Acqusitions and Mergers in the Hospital Market”, Reiboldt—an expert on mergers and acquisitions in the healthcare market—said many of the same market drivers that made 2010 a good year for hospital mergers will likely continue into 2011.
“Hospital M &A is no longer a dirty word,” he asserted. “These transactions are increasingly accepted by hospital management and boards of directors.”
Reiboldt noted that many hospitals and health systems view the acquisition of – or mergers with – other facilities as a viable strategy for long-term growth, and that a merger or acquisition offers hospitals an opportunity to increase their market share, he “The M &A process should be one aspect of a hospital’s strategic plan,” he explained.. “If you’re selling your hospital, don’t be afraid to create value. And buyers, don’t be afraid to spend the money to do the job right.”
Moreover, Reiboldt pointed out, many stand-alone hospitals face great economic uncertainty, rendering the idea of a sale appealing to leadership. When an increased regulatory burden, the threat of a return to managed care and challenges with physician employment are also taken into consideration, opting for a merger or acquisition becomes even more attractive to an increasing number of hospitals.
“Many stand-alone hospitals have limited access to capital and will be unable to handle increased patient volumes as our society ages,” Reiboldt said. “Selling your hospital to a larger system means gaining access to economies of scale and scope.”
He added that for many distressed not-for-profit facilities, consolidation is a defensive measure, but for larger health systems doing the buying, an acquisition is an opportunity to add new services and enter new geographic regions, Diversifying the patient base and the payer mix are often equally important to health systems acquiring other facilities, according to Reiboldt.
The expert also offered a few suggestions for hospitals considering a sale or merger.“Understand both your local and national markets to know what buyers are seeking,” he advised. “Strategic and operational factors generally outweigh financial metrics in an acquisition. Outline your goals before the transaction process begins, and be sure to vet all your alternatives to a complete sale.”