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3 Characteristics of Successful Community Hospitals

There is no question that the healthcare industry's rate of consolidation has increased dramatically in past years. While the specific amount of deals and dollars involved in healthcare transactions fluctuates quarter to quarter, the merger and acquisition activity has been steadily high. According to Irving Levin Associates, in the third quarter of 2012 alone, there were 216 deals worth $38.1 billion dollars. Hospital transactions accounted for 11 of those deals worth $121.9 million.

While many transactions between hospitals and health systems are occurring, there are still many hospitals that remain independent. Whether a hospital should look for a partner or remain independent depends entirely on its own unique situation — its culture, mission, goals, community and finances, etc. However, as the statistics show, partnerships and affiliations are common. A hospital that strives to remain independent right now could have more leverage for transaction discussions down the road.

According to Mike Williams, president and CEO of Community Hospital Corp., independent hospitals often embody a few characteristics, which allow them to remain independent and successful, despite the changing healthcare industry and increasing pressures to offer high-quality care at lower costs.

For instance, there is a hospital in the far west suburbs of Chicago that remains a standalone hospital: Edward Hospital in Naperville, Ill. The hospital has focused on a few key areas of its operations, which have allowed it to maintain its standing. Yet, hospital officials do not negate the possibility of a partnership in the future. "We are always willing to partner with physicians and other healthcare providers to bring the best services to our community," says Brian Davis, vice president of marketing and government relations for Edward Hospital.

However, it is still a great illustration of how hospitals can elevate finances, patient satisfaction and operating structure to either remain independent or increase leverage in transaction discussions. Here are three characteristics Edward Hospital has developed, which have allowed it to remain a strong, standalone hospital.

1. Solid market position. According to Mr. Williams, hospitals with a strong market share may have more leverage for negotiating rates with payors as well as better recruitment and retention of talented physicians, among other advantages. When a hospital has a lower market share, it may be driven to look for a partner. Edward Hospital has remained independent because it holds a strong position in its community. "Edward is the 8th largest hospital in the Chicago area by revenue. We are the most preferred hospital in the region and the most preferred hospital in Illinois for cardiovascular and oncology services," says Brian Davis, vice president of marketing and government relations for Edward Hospital.

2. Stable leadership.
According to Mr. Davis, Edward Hospital has been able to maintain its independence in part due to the strength of its CEO, Pamela Davis.

"[Ms. Davis] has been the leader [of Edward Hospital] for more than 20 years. She has built a strong leadership team and led the hospital to become a regional medical center. When I came to Edward 15 years ago, we were still acting like a small community hospital, but now, we are more of a regional medical center. We have multiple locations throughout the region," says Mr. Davis.

3. Strong relationships with physicians, physician groups. An independent hospital often has strong relationships with its physicians and/or physician groups in the area, and Edward Hospital is no exception. When there is a good relationship, both parties can work more effectively toward high-quality outcomes.

"As long as [Ms. Davis] has been with Edward, she has been focused on developing mutual respect by partnering with physicians to improve quality and efficiency," says Mr. Davis. "In her role, she is willing to share oversight and responsibility with the physicians, allowing her to rely on them to help the hospital run efficiently. However, she shares that responsibility and holds herself accountable for the results."

More Articles on Community Hospitals:

To Be or Not To Be Independent: 5 Considerations for Community Hospitals
5 Tips for Clinical Consolidation in Hospital Transactions
3 Emerging Trends in Community Hospital Transactions

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