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Healthcare M&A frenzy represents 'frantic attempt' to increase patient populations: 5 takeaways

The frenzied pace at which hospitals and health systems are engaging in merger and acquisition activity reveals a "frantic attempt" to "control" patient populations and the facilities patients go to for care, according to a report by The New York Times.

Here are five takeaways from the report.

1. Patients are increasingly looking to nontraditional outlets for care. Facilities such as urgent care centers or walk-in clinics, and the use of technology such as apps to diagnose and treat common illnesses, prove less expensive and more convenient than a hospital emergency room or physician's office, the report states.

2. Along with nontraditional care facilities, however, other players within the industry — including insurance providers and pharmacy benefit managers — are also seeking to disrupt hospitals' relationships with their patients and the potential revenue those patients provide, according to the report. Recent deals such as Aetna's $69 billion acquisition of Woonsocket, R.I.-based CVS Health and Amazon's potential foray into the pharmacy market may transition patients further away from the hospital care model in favor of potentially cheaper, more convenient care options.

3. To combat the trend, hospitals and health systems are increasingly looking to team up so that they don't become a "small fry in the changing healthcare landscape," Leemore S. Dafny, PhD, a professor of business administration at Boston-based Harvard Business School, told The New York Times.

4. While the merged hospital chains allow the systems to "have much stronger tentacles into the patient population they are trying to reach," according W. Kenneth Marlow, a healthcare lawyer with the law firm Waller Lansden Dortch and Davis, patients may still refuse to receive care at a certain facility if the cost of care becomes unaffordable, which experts like Dr. Dafny say may happen if systems within the same state combine.

5. To encourage patients to visit their facilities, hospitals must use their proposed merger to reinvent themselves rather than simply raising prices, Thomas Cassels, a consultant at the Advisory Board, told The New York Times.

"Health systems are considerably more concerned with being convenient and not unaffordable than they are making services less desirable because they are more expensive and on the hospital campus," he said.

To access The New York Times article, click here.

More articles on transactions and valuations:
9 recent hospital partnerships and transactions
Ochsner to officially ink agreement to operate Louisiana safety-net hospitals
Cooper University Health Care ends plan to acquire Trinity Health's NJ assets

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