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Healthcare Consolidation: M&A Not the Only Way

Philip Betbeze, for HealthLeaders Media, June 19, 2013

"During the initial stage of the transaction, there is a great deal of involvement related to all aspects of the hospital. While this level of activity can be challenging, we have found that the hospitals are pleasantly surprised by the quality of resources and support we bring to them," Murphy says.

Hospitals should realize that any flirtation with partnership can be a liberating process, if you have a vision for your future. You might need expertise and outside investment to achieve those goals, but those goals usually are the first thing potential suitors want to review, because you and your team have the most important knowledge about what works and what doesn't in your local market—it's not just an opportunity for suitors to add mass.

"The first thing we want to evaluate is what the hospital's affiliation objectives are," says Murphy. "The partnerships that go the best are the ones where the board and the management team invest the most time on the front end determining their objectives for the affiliation."

 That can take a surprising amount of time, because Murphy says the suitor will always seek to discover how well thought out those objectives are. That allows the suitor, especially in a formal RFP process, to determine how much value it can add and in what areas—essentially, if it can meet the local objectives for affiliation.

"Places where we tend to hit home runs are with folks looking for strategic help in areas where our hospital support center has expertise and resources to offer," he says, referring to a centralized group of resources within LifePoint that provides its facilities with operational support, such as dealing with the complexities of healthcare reform. Support ranges from navigating government regulations to providing guidance about changing business realities in dealing with commercial payers to collaborating with other care providers that may not be integrated with the local hospital or health system.

"The marketplace has become so complicated, given the more sophisticated ways of engaging with physicians, payers, and health exchanges," he says. "We know how to do that. For an independent hospital, it can be very difficult."

Murphy says some hospitals may be looking for a partner that will allow them to continue making all the decisions, while each suitor has a different approach to local decision-making. "The management and boards at our company are the teams that want to be there actively involved with their partner in decision-making going forward."

But it's hard to look at an income statement and make a determination on whether the hospital or system seeking a partner is doing what it needs to do for its community.

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