M&A and the Cost of Quality
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This article appears in the November 2011 issue of HealthLeaders magazine.
Vice President of Operations
Noyes Memorial Hospital, Dansville, NY
As we talk about economies of scale, being connected to larger entities increases your negotiating power. Supplies and your reimbursement for payer contracts can be much more favorable to a larger organization and a larger system than they can for the independent hospitals that are out there on their own.
Regardless of where healthcare reform is going to take us, it is going to be based on quality. So everybody is going to be raising the bar to meet the metrics. Larger systems can have greater commitment to these efforts because they’ll have the resources to do so.
The quality/cost piece is an important part of it. You are doing more with less each year. How do you get patients in the door? How do you install the EMRs and other initiatives that are going to drive reimbursement as an independent organization?
When you’re in these merger and acquisition conversations, for the smaller hospitals the challenge is, how do you keep that local flavor? The only way that is possible is to enter into these conversations when you are healthy. If you get to the point where your bottom line is shot and you have a hard time recruiting and retaining medical staff, the likelihood of your maintaining some level of identity is going to be pretty slim.
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