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Hospitals Pursue Managed-Care Affiliations More Often Than Mergers and Acquisitions, Survey Shows

Hospitals Pursue Managed-Care Affiliations More Often Than Mergers and Acquisitions, Survey Shows

A recent survey of 224 hospitals nationwide, conducted by health-care management consulting firm TriBrook/AM&G, revealed that the number of hospitals pursuing managed-care affiliations is growing quickly, outpacing the growth in mergers and acquisitions.

In fact, while only 18% of hospitals indicated that they are currently affiliated with a hospital network, nearly half (48%) expect to be affiliated by the year 2000. Only 12% of respondents expect to remain completely free-standing into the next millennium. Currently, more than half (52%) of respondents are free-standing hospitals.

Although mergers and acquisitions are being pursued less frequently by hospitals, a significant 17% of respondents indicated that they are currently pursuing merger and acquisition opportunities. According to survey respondents, the primary reasons for rejecting merger and acquisition opportunities are a loss of autonomy and a lack of trust among the hospitals involved.

However, the payoff is worth the challenges of a merger or acquisition, as this form of collaboration was rated most successful by hospitals. On a scale of 1 to 5 (where 5 indicates highly successful), mergers and acquisitions received a rating of 4.0, compared to 3.3 for affiliations.

"The results of our survey clearly show that while there may be some initial suspicion of the merger or acquisition process, the hospitals that have 'taken the plunge' and completed a merger or acquisition find that the benefits are well worth it," said Rufus Harris, a principal with TriBrook/AM&G who was instrumental in developing the survey.

The primary benefits of all forms of collaborative efforts cited by survey respondents are:

  • Reduced operating expenses;
  • Improved community health status;
  • Increased market share;
  • Reduced capital expenditures; and
  • Increased managed-care contracts.

When choosing a collaborative partner, shared vision or mission is the most important criterion, followed by image/reputation, management style/ethics, managed-care contracts/networks, and market share. The most important contribution hospitals believe that they can offer to a collaborative partner include geographic location, cost-effectiveness, image/reputation, continuum of services, and managed-care contracts.

"Without a doubt, hospital collaborations in some form represent the wave of the future in health care," said Rufus. "Whether as a result of mergers or acquisitions, managed-care affiliations or a myriad of shared service arrangements, it is clear that there will be very few completely free-standing, independent hospitals remaining in the year 2000."

To receive a free copy of the full results of the survey, contact Rufus Harris at (708) 990-8070.

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