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A Rising Trend of the Healthcare Sector-Hospital Merger and Acquisition

The healthcare industry is undergoing tremendous changes and evolving rapidly in an attempt to improve patient satisfaction and create meaningful patient engagements. There is an imperative transition from volume-based to value-based healthcare models in order to achieve this and gear up towards better population health objectives. This involves major capital funding and enormous expertise in healthcare operations management. So there is a strong temptation from even the most sophisticated and independent healthcare units and systems to explore the possibility of consolidation through mergers and acquisitions.

 

The implementation of value-based care services calls for very high hospital quality management  to ensure better patient outcomes while simultaneously reducing healthcare costs. Therefore hospital consulting firms recommend hospitals to tie-up with larger healthcare organizations or network with other healthcare providers. This helps in getting a better insight into the complete lifecycle of a patient’s treatment journey so as to minimize unwanted medical expenses. Value-centric care also necessitates the accessibility of higher clinical capabilities and resources from multiple facilities which can be achieved by mergers and acquisitions.

 

Let us explore the reasons for the recent increase in hospital mergers and acquisition and the benefits accrued thereof by this strategic move.

 

Reasons for Hospital Mergers and Acquisitions (M&A)

  • Fosters better partnerships for deriving higher economies of scale in various areas including
    • Medical support services like pharmacy and diagnostics.
    • Clinical supplies.
    • Healthcare information technology, networking and infrastructure and
    • Outsourced services like bio-waste management and medical transportation.
  • Reaps long-term advantage of rationalizing the service distribution across all entities of the healthcare chain.
  • Supports a patient-centric healthcare system that is endowed with new capabilities like data analytics, cloud computing, quick access to emergency care centres for expedited treatment and telehealth facilities for improving healthcare accessibility.
  • Enables better control of cost and patient care by delegating responsibilities and providing empowerment through accountable healthcare services and advanced alternative payment models and billing systems. This promotes quick and secure online financial transactions thereby reducing the cumbersome manual operations and inefficiencies.
  • Promotes scalability of healthcare operations for handling higher volumes of patients and also addresses preventive aspects of healthcare for improving public health standards.
  • Clearly offsets the potential financial risks and losses which occur due to increased expenses and poor outcomes in rendering care to a smaller population.
  • Increases operational efficiencies of value-based models by allocating bonus and incentives based on result-oriented healthcare performance.
  • Fuels focus on dispensing effective and efficient personalized treatment to individual patients.
  • Results in the better positioning of the hospital’s brand in a dynamically changing healthcare environment.
  • Decreases operating expenses due to higher task and resource allocation efficiencies for all hospital admissions thereby increasing the revenue margin.
  • Creates a positive impact on care quality through wider spectrum of services and customized offerings thereby significantly reducing hospitalization durations and re-admission rates of patients.
  • Increases quality of care due to upgraded facilities and process standardization.
  • Reduces the burden of operational issues by increasing the hospital capacity and bed occupancy thresholds as many routine tasks are outsourced through partnerships. This decreases stress in day-to-day hospital management issues and allows handling of complicated cases with higher acuity.
  • Gives greater bargaining power for negotiating better deals with insurance partners thereby generating bigger revenue and incomes.
  • Uplifts the hospital’s status with higher visibility and stature due to the restructuring of the healthcare system. This makes the hospitals more appealing to potential patients thereby building long-term trustful relationships due to increased transparency and healthcare ethics.

The newly restructured hospital is likely to have diversified staff who can overcome cross-cultural barriers by better understanding the needs of domestic and international patients. This builds a homely healing environment.