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Hospital M&A Volume Up, Value Down in 3Q

John Commins, for HealthLeaders Media, December 6, 2013

Dan Farrell, a partner at PwC, says uncertainties around the Patient Protection and Affordable Care Act continue to press consolidation in the healthcare market place: building economies of scale, capital needs, and improving market share. The PPACA creates ramifications for healthcare delivery and reimbursements and capital needs.

"I don't think much has changed in terms of the fundamentals from last year to this year. Everyone is bracing themselves for what they are predicting will be the changes around the Affordable Care Act," Farrell says. "Not too much certainty has been given through today, so people are still placing their bets on where they think things are going to fall out."

Farrell says the concerns of providers around concepts such as accountable care organizations lies not so much in whether or not the new value-based reimbursement model will work, but what optimal structure ultimately will take shape.

"There are two dynamics that everyone can agree on with ACOs and the impact of the ACA," he says. "One, you need to increase your scale because you are going to deal with a lot more at-risk contracts. So, where you have at-risk arrangements, scale can minimize the potential financial risk.

"A little more technically complex is the need to extend your continuum of care, specifically around hospitals and physician practices. Payers are looking at building out their continuum of what they control beyond the four walls of the hospital and into other areas such as home health, long-term care, and skilled nursing. So we see a lot of deals that are focused either around: one, increasing the scale or, two, extending the continuum of care."

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