"They could be doing all of those things wonderfully and still not have a good balance sheet or income statement," he says. The reverse is also true.
Smaller hospitals and boards that recognize early the need for a partner are getting more sophisticated in seeking that partner. "It's very rare we're the only seat at the table, and it is frequently difficult for me to figure out how many folks are at that table," he says. "My impression is that these processes have become very competitive. Many hospitals have north of 10 parties looking at their transactions."
In opportunities that are in strategic markets, there can be a lot of activity. Most acquirers are very strategic in making the decision as to where they will do a deal, and there are a lot of opportunities.
LifePoint evaluates each situation to determine whether it is a LifePoint or Duke-LifePoint opportunity. Those opportunities lie with larger, tertiary care facilities "where we can combine our operational strength with Duke's expertise in higher-level clinical programs, like cardiology, oncology, and neonatology," he says.
Summa's deal was somewhat unique, in that it controlled the partnership selection process, but Strauss is convinced similar deals can be replicated.
"Not every organization can demand these kinds of relationships, but deals like these will be the future," Strauss says. "The biggest thing is that a lot of people—especially from larger organizations—didn't understand this concept of minority interest. We had to continually clarify and some were skeptical we'd get this kind of commitment." He stresses the need to "overcommunicate," not only with potential suitors but also with your organization's own stakeholders.
"It was important to communicate to employees, management, and physicians about what this was, but also what it wasn't," he says. "You have to commit to your mission vision, values, and culture and be relentless in that pursuit. Because at the end of the day, you have to live by those values and you can't give in even for something that appears to be more attractive for the short-term but in the long-term could hurt the community's assets."
This article appears in the June issue of HealthLeaders magazine.