Hitting the Landing Zone
Healthcare leaders need to find the right partners and strategies as they take the leap into value-based care.
This article first appeared in the October 2016 issue of HealthLeaders magazine.
Hospital consolidations have become a weekly event across the United States, and the pace and scope of these consolidations is getting faster and bigger. In 2015, the number of hospital transactions increased to 112, up 18% over 2014's 95 deals, which, according to a study from consultants Kaufman, Hall & Associates, LLC, includes mergers, acquisitions, joint ventures, and joint operating agreements. Such activity is more than 70% greater than the 2010 level of 66 deals.
Hospital leaders say these consolidations are driven by a big push from the Patient Protection and Affordable Care Act and commercial payers toward population health and risk-bearing, value-based care, which require economies of scale.
"When the ACA said you had to have an electronic health record and the ACA expects everyone to move to population health, that doesn't come cheap," says Christopher G. Dawes, president and CEO of Lucile Packard Children's Hospital Stanford and Stanford Children's Health in Palo Alto, California. "You have to buy these very sophisticated computer systems. We are a moderately sized hospital, and we purchased an electronic health record system that cost us more than $110 million, with the acquisition price and training. That is obviously a lot of money."