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

October 1, 1996

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.

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

In fact, while only 18% of hospitals indicated that they are currentlyaffiliated with a hospital network, nearly half (48%) expect tobe affiliated by the year 2000. Only 12% of respondents expectto 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 frequentlyby hospitals, a significant 17% of respondents indicated thatthey are currently pursuing merger and acquisition opportunities.According to survey respondents, the primary reasons for rejectingmerger and acquisition opportunities are a loss of autonomy anda 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), mergersand acquisitions received a rating of 4.0, compared to 3.3 foraffiliations.

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

The primary benefits of all forms of collaborative efforts citedby 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 missionis the most important criterion, followed by image/reputation,management style/ethics, managed-care contracts/networks, andmarket share. The most important contribution hospitals believethat they can offer to a collaborative partner include geographiclocation, cost-effectiveness, image/reputation, continuum of services,and managed-care contracts.

"Without a doubt, hospital collaborations in some form representthe wave of the future in health care," said Rufus. "Whetheras a result of mergers or acquisitions, managed-care affiliationsor a myriad of shared service arrangements, it is clear that therewill be very few completely free-standing, independent hospitalsremaining in the year 2000."

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