Pace of Hospital M&As Likely to Accelerate

John Commins, March 19, 2012

Expect the wave of hospital mergers and acquisitions to grow, says the author of a new report from Moody's Investor Service.

The only thing that might slow the accelerating pace of M&As of not-for-profit hospitals and health systems would be if the U.S. Supreme Court overturns the individual mandate in the Affordable Care Act.

And even if the mandate is scuttled, Lisa Goldstein, associate managing director at Moody's, says that will create only a temporary "stumbling block" in the consolidations, because other financial pressures will remain in play regardless of the high court's ruling.

"If the Supreme Court rules that the individual mandate is indeed unconstitutional, then some hospitals or health systems may take a pause and ask, 'Do we need to grow? Do we need to join a system?'" Goldstein tells HealthLeaders Media. "But we believe that would be a brief pause because the main driver of the consolidation wave is overall payment reform, revenue reductions, and reimbursement pressures. Whether or not the mandate stands, the reimbursement pressure is going to continue."

Goldstein, the author of a new Moody's report—New Forces Driving Rise in Not-for-Profit Hospital Consolidation—says many of the market forces that were in play in the not-for-profit consolidation boom of 12 years ago are still in play now. Those forces include improving market share to better leverage payers, risk sharing, economy of scale, access to capital and technology, expansion of service lines, and improved recruiting.

John Commins

John Commins is a senior editor at HealthLeaders Media.

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