Live from HFMA: Fundamental Shift Seen in Healthcare Acquisition and Affiliation Strategies

June 23, 2014
Acquisitions and affiliations are now being driven more by strategy than by financial need, according to new research released today at the Healthcare Financial Management Association’s (HFMA’s) 2014 National Institute in Las Vegas.

Acquisitions and affiliations are now being driven more by strategy than by financial need, according to research released today at the Healthcare Financial Management Association’s (HFMA’s) 2014 National Institute in Las Vegas. 

While traditional acquisitions—in which a weaker healthcare system is acquired by a stronger one—still occur, the trend is shifting toward mergers and acquisitions that take place between financial equals, according to the report. These are value-focused acquisition and affiliation strategies, geared toward improving the quality or cost-effectiveness of care, as opposed to dominating markets.

Interviews with consultants and provider organizations actively pursuing these strategies revealed several key drivers and defining characteristics of acquisition and affiliation activity in the healthcare provider marketplace today:

  • Key drivers include improving operational efficiencies, creating clinically integrated care delivery networks, and accessing sufficient populations for population health management.
  • Many acquiring organizations are not interested in adding acute inpatient capacity. As a result, the other assets a hospital-based system can bring may be equally or more important than the hospital itself.
  • Financially troubled hospitals are becoming less attractive acquisition targets.
  • For affiliation and acquisition purposes, the distinction between not-for-profit and for-profit status is lessening in importance, although religious affiliations of not-for-profit systems still pose roadblocks for some partnerships.
  • Some organizations are pursuing innovative models that are characterized by the parties involved as combinations rather than mergers.

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