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Hospital Affiliations Have a Land Rush Feel

Philip Betbeze, for HealthLeaders Media, June 24, 2011

Not that I take any joy or sorrow from reading about these deals, but they’ve become so commonplace. For those leading community hospitals, the affiliation environment is pretty good, especially if you control your local market. That won’t necessarily be the case in the future.

Although circumstances are entirely different, I see some of the same forces at play in this rush to grab market share that I saw back in the ’90’s when hospitals routinely spent millions buying up physician practices only to find later that controlling market share was hardly enough to make the acquisitions a success. Of course, the biggest difference between the buying spree of the ’90s on physician practices and the post 2010 rush to affiliate with community hospitals is the routine absence of cash in most of the deals I’ve seen. Governance issues aside, that seems to protect both parties should the deal not work out as they anticipate. That sense of caution was notably absent in the rush to acquire physician practices in the past.

Standalone community hospitals have been able to withstand big challenges in the past, but the fundamental restructuring of the reimbursement system seems to be a bridge too far. The injection of risk into the business equation for a community hospital appears to be the last straw. The last big cottage industry in America is going by the wayside, and the implications of that transformation are just beginning to be felt.

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