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Why Financial Success Eludes Majority of Healthcare Mergers

Philip Betbeze, for HealthLeaders Media, October 26, 2012

Dating Comes Before Marriage
Saxena suggests that time should be spent assessing something he calls "capability fit" before agreeing to a merger.

"Capability fit is really meant not as functions but as sets of activities which differentiate you and which you are good at in the marketplace," he says. "When there's a degree of coherence and consistency you see a great deal of success."

For instance, it's incoherent for a high-cost player, like an academic medical center, which has built around innovation and being leading edge, to try to become the value player by trying to appeal to the Medicaid population or small, price-sensitive employers, Saxena explains.

"They're not consonant with ability to be low-cost and affordable, and often the acquired entity takes on all the bad habits of the acquirer."

Don't Be a Wallflower
But here's what's interesting: Many hospitals and health systems are at least considering that full mergers aren't in the best interest of either party. That's why we continue to see innovation on the partnership front, something the study doesn't attempt to address, but Saxena will.

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