M&As to Continue with Smaller Deals

, October 28, 2013

Don't look for a slowdown in healthcare mergers and acquisitions anytime soon. While the era of mega mergers has peaked, one observer says to watch for robust consolidation activity among small health systems and stand-alone hospitals.

How are hospitals and health systems preparing for the financial effects of health insurance exchanges and other key pieces of health reform legislation? One popular strategy that is unlikely to abate any time soon is to consolidate with other providers.

This is a way of creating population health management alliances, preparing for the shift in patient volume to ambulatory settings, and finding economies of scale for supply chain purchasing.

Birth of a Mega System
The latest health system mega merger is between Baylor Health Care System and Scott & White Healthcare, which sealed the deal to create Dallas-based Baylor Scott & White Health in September, almost a year after it was announced.

The combined $8.3 billion organization has 43 hospitals, more than 6,000 physicians, 34,000 employees, and more than 500 patient care sites, making it the largest not-for-profit health system in Texas.

I recently asked Frederick Savelsbergh, who was CFO at Baylor Health Care System and now holds the same position within the new organization, what influenced Baylor's decision to merge with Scott & White. He said preparing for the impact of the Patient Protection and Affordable Care Act was a major factor.


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