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More Than Money: The Changing Landscape of Hospital Consolidation, Affiliation

At the Becker’s Hospital Review Annual Meeting in Chicago on May 10, a panel of hospital executives and experts discussed why money is not the only consideration for consolidation and partnerships in a session titled “Key Issues in Hospital and Health System Consolidation and Affiliation.”

Presenters included Tim Rice, chief executive officer of Cone Health; Daniel Cain, co-founder of Cain Brothers & Company; and Joseph Lupica, chairman of Newpoint Health. Barton Walker, partner at McGuireWoods, moderated the session.

Mr. Cain impressed upon hospitals and health systems considering consolidation to “go where the money is and then marry for love” — meaning, find financially healthy systems to partner with, but let quality and culture be the biggest determinants.

Some questions a system should ask itself when considering a partnership are:
  • What can we do together that we can’t do on our own?
  • How does that affect our balance?
  • Who is going to bring opportunities on scale?
  • Who will improve the quality of work and fit with us culturally?
The consolidation market has changed, Mr. Rice said, and ideas are just as much of a commodity now as money alone. Look for ideas that will make your system better.

Finances will always play a role, but they should be one of several elements weighed. Other important aspects of a future relationship are quality of care, leadership skills and physician network.

The structure of partnerships has changed in the past 30 years, as well. Board seats are now more important than currency, Mr. Cain said. However, even in 50/50 partnerships, well-drafted legal documents should contain definitive agreements that trump board seats to break ties, Mr. Lupica said.

More Articles on Transactions and Valuations:
Co-Management Agreements: Real-Life Lessons and Key Concepts
Massachusetts General Obtains License to Buy Cooley Dickinson Hospital
Consultants to Weigh Possible Sale of El Centro Regional Medical Center in California

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