Hitting the Landing Zone
Creating the infrastructure to provide population health is also labor intensive.
"That is dozens and dozens of people who are focused on population management, doing the analytics, and involved with sales and managing activities and managing utilization," Dawes says. "If you are going to get into population management, you can't do that as a small player. You don't have the critical mass to make the math work. The pediatric and adult world are being pushed into larger entities, and they need to get some value out of the scale."
Even as the pace of hospital consolidations is accelerating, the process is evolving, and that means hospital leaders must adapt.
"Historically there were two kinds of mergers and acquisitions," says Michael D. Williams, founding president and CEO of Plano, Texas-based Community Hospital Corporation. "It was the investor-owned sector looking for those hospitals that had been poorly managed, that they could gain low-hanging fruit in a short period of time. It was acquisition for the purpose of growing the revenue stream and the bottom line.
"On the not-for-profit side," he says, "it was that spoke-and-hub mindset of 'If we can go out and acquire enough of the surrounding smaller hospitals, we can get a greater percentage of the referrals and we are the tertiary center, we can be more successful.' "
What has changed, Williams says, is that both the investor-owned and not-for-profit sectors have become more selective about the hospitals they're acquiring.
"They are looking for the already high-performing hospitals that can be acquired to complement their own portfolio," he says. "The not-for-profit sector organizations are saying, 'No longer can we afford to go out and acquire smaller hospitals or community-based midsize institutions and accept the liability associated with their bottom line. We have to be creative in determining new types of relationships that will bring us what we need and want, but without accepting that liability.' "