4. Mergers and acquisitions: Growth may be good, but it doesn’t come cheap or easy. Because recruiting individual physicians is time-consuming and costly, merger with or acquisition of a group practice is an increasingly popular shortcut to market share.
These days, though, getting the capital together to purchase another organization isn’t easy, which is one reason that private equity firms are entering the healthcare sector. A Pepperdine University survey of private equity executives at the end of 2010 found that 11% planned to invest in healthcare – more than double the response just six months prior (4.8%).
Because most healthcare companies are too small to be publicly traded, private equity can be a conduit to funding for M&As. But it isn’t the only avenue, of course. I discussed private equity and other funding paths in the special report, Hospital Mergers & Acquisitions: Opportunities and Challenges.
Certainly cost reductions will never be out of vogue for healthcare CFOs. But top-line growth, efficiencies, and funding must take equal if not greater priority in the coming years. With the prospect of declining reimbursements, finding ways to shore up your balance sheet is a must.