Healthcare M&A: Is It Different This Time?

Philip Betbeze, April 1, 2018

A surge of large-scale healthcare mergers suggest the calculus and goals may have changed within the healthcare industry.

This article first appeared in the March/April 2018 issue of HealthLeaders magazine.

Today's mergers are less a play on market domination and negotiating leverage with health plans, and more of a bid for vertical integration and development of a high-value provider network.

 Marc Harrison, MD
Marc Harrison, MD
Courtesy of: Lance Clayton-The Verbatim Agency

Several sizeable healthcare mergers have been announced over the past year. Dignity Health and Catholic Health Initiatives signed a definitive agreement as 2017 closed. Chicago-based Advocate Health Care plans to merge with Milwaukee's Aurora Health Care.

Even Seattle's Providence St. Joseph Health, which was created by a major merger announced just 18 months ago, has been rumored to be in talks with Ascension Health about a merger that would dwarf all other hospital-centric mergers announced recently.

Research suggests that despite the claims of the organizations involved, multistate healthcare mergers often result in higher costs for healthcare purchasers and do little to improve care, although an American Hospital Association–funded research study disputes that conclusion.

But regardless of what the research states, or the vagaries of markets and geographies, a surge of announced and completed consolidations continue to tout cost and care quality as their deal's chief benefits.

The healthcare industry may not have a great record of providing lower costs and higher quality thanks to mergers, but that record looks somewhat better if viewed through a lens of higher margins and back-office economies of scale.

That said, prior deals may have little bearing on the benefits or costs of future mergers, because the nature of healthcare M&A seems to be changing.

Philip Betbeze

Philip Betbeze is the senior leadership editor at HealthLeaders Media.

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