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Key Factors Affecting Community Hospital Sales: 3 Experts Discuss

Three experts discuss the various issues influencing the sale of community hospitals.

At the Annual Becker's Hospital Review CEO Strategy Roundtable in Chicago on Nov. 14, Rex Burgdorfer, vice president of Juniper Advisory, Geoffrey Cockrell, JD, partner, and Holly Carnell, JD, associate, both at McGuireWoods, discussed key issues in the sale of community hospitals.

The discussion was moderated by Scott Becker, JD, partner  at McGuireWoods and publisher of Becker's Hospital Review.

Mr. Becker opened the session by asking panelists about the biggest driver of community hospital sales. According to Mr. Burgdorfer, the current climate of the healthcare industry, in which reimbursements are declining and the cost of care delivery is increasing, is the biggest driver influencing community hospitals to seek a buyer or partner. "A lot of mid-size hospitals feel as though they need to be bigger to survive," he said.

There are several factors affecting community hospital sale negotiations, one of which is the issue of partnering with a local hospital. "If a potential buyer is a local hospital that is a direct competitor, there may be emotional resistance to the idea of the sale," said Mr. Cockrell. There used to be a stigma attached to the idea of including a local direct competitor in the mix of buyers, added Mr. Burgdorfer, but today, it is no longer looked at as a weakness.

Another important issue during negotiations is telling hospital staff and the community about plans to sell. "The earlier you tell the physicians and the community, the better," said Ms. Carnell. "The news is going to get out either way, so the more you can control the spread of the news, the better it will be."

Mr. Burgdorfer said hospitals are doing now doing a much better job at communicating the news. They often hire communication firms to help coordinate spreading the message to the physicians and the community.

The panelists also discussed the importance of community hospitals finding a good cultural fit when looking to sell. Mr. Burgdorfer spoke about Brentwood, Tenn.-based Duke Lifepoint's $483 million acquisition of Marquette (Mich.) General Hospital. Before the sale was finalized, a group from Marquette General visited Duke to get an idea of the way things operate at Duke. The group consisted of management team members, board members and physicians.

"Going through with a sale is not just an economic decision," said Mr. Burgdorfer. "It is it is also a community-based and cultural decision."

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