Despite recent news headlines about merger failures, many M&A deals are successful. Recently acquired hospitals improve their financial and operational performance more after a deal versus their non-acquired peers, one study shows.
Good news comes from the merger and acquisition front in healthcare this week. Deloitte has published a special report that shows hospital and health system mergers (PDF) in 2007 and 2008 have been increasingly successful—at least if the metric is significantly improved hospital profit margins. I encourage you to devote some time to it, because if other statistics are to be believed, some 20% of you will be directly involved in a merger or acquisition over the next decade.
Despite several high-profile merger flameouts of late—see here, here and, most recently, here—it's clear that healthcare has to consolidate. Smaller hospitals and systems are simply being priced out of the market, and not only from a competitive standpoint. Smaller hospitals and health systems are looking for partners because compliance with a raft of new incentive-based reimbursements, not to mention coding and other technology requirements, is much more difficult for them than it is for the big guys.
Think of what happened when Wal-Mart and a few others took over retail from smaller organizations over the past few decades. There's not a direct correlation, but the similarities are there. It's also clear from the Deloitte study that despite frequent news headlines about merger failures, many are doing it well.