Amid an improving economic climate, and provided that a long-term reorganization of health care insurance and delivery model remain active, mergers and acquisitions will continue to increase rather noticeably.
While the healthiest corporations and service providers from the broader industry are consolidating and shifting the majority of their investment dollars overseas, many medical providers have built stand-alone facilities that are too enormous in size and cost to simply serve their niche within a locale, larger community or city. While not all regions are alike, especially when considering that of Texas’ strong population influx, international investment and patient demand, many large physician groups and systems in the United States are weary of growing outside of physician boundaries and are awaiting coercive change to help define their future.
The reasons for staying local are many, as suggested by several insiders. One is the contention regarding regulatory influences located in municipalities, cities and states and the inability to structure same healthcare delivery models state-by-state. Another is that, commonly during stronger economic times, organizations tend to compete over the same clients, or patients for the sake of this article. As such, nearby outpatient facilities and surgery centers will continue to be a viable growth strategy. Another factor has to do with the influence of key physicians within the hospital system who would much rather drive to their practice, or investment, than fly. The last reason that a business model may remain local is due to the lack of familiarity and partnership with qualified business professionals to support and grow operations outward, rather than upward and around.
How Quality Leadership Creates Long-Term Synergies for Healthcare Mergers and Acquisitions
Mergers and acquisitions will grow and will affect healthcare providers and physicians.
During a healthcare merger or acquisition, the feelings of physicians and employees involved usually swings one of two ways. Sometimes physicians are excited about the prospect of working for a larger, stronger post-merger organization, especially if it creates opportunities for ownership, seniority or stability. More often, though, the physicians and staff see themselves at odds with new ideas, management styles or facility relocation.
Without third-party leadership, the nightmares that may occur with existing administration, especially if undersized, have the potential to create potentially undesirable circumstances that could jeopardize the transaction simply through association. Working with the conflicting interests of two cultures to form one means standardizing policies, procedures and systems. In this case, facility administrators have to reach out to coordinate with other real estate administrators, executives and physicians to determine whether to consolidate facilities with overlapping functions, and if so, how that should be done and which buildings should be divested. The exact criteria varies and the process must be handled appropriately so that all interests remain confidential, costs are minimized and physician continuity is ensured.
No matter with whom the provider chooses to work, every merger or acquisition is different, and therefore each requires a separate strategy to reduce heavy cost and reduce or eliminate potential redundancies. Our due diligence and merger planning team is responsible for looking at every aspect of business side of the transaction, from financial data and corporate philosophies to real estate holdings, and then work to construct a plan for the transition into the post-merger environment.
As cumbersome as this appears to be, it is very surprising to note how most large practice groups and healthcare providers in the past rarely sought such assistance. This expertise is very common within the corporate real estate world to eliminate conflicts of interest and provide confidentiality and goodwill among employees. Today, it is imperative for healthcare providers to seek third-party facility transition executives that are responsible to the healthcare industry, have the resources and capability to provide informative research and comprehensive reporting, maintain a quality reputation within the sector without conflicts of interest, and can intelligently advise across business, real estate and merger or acquisition activities.
