Healthcare Providers Poised for Wave of Merger Activity

Up to 1,000 Facilities May Change Hands by 2020, Booz & Company’s Gary Ahlquist Says in Latest Mergercast Podcast Episode

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In this post-managed-care era, the integration of health providers will be driven by the need to align organizations’ core strengths so they’re better able to minimize financial risk while improving opportunity for profit.

New York, NY (PRWEB) March 20, 2013

Facing high pressure on margins and growing financial risk, hospitals, medical centers, non-acute care facilities and other healthcare providers have begun turning to mergers to remain viable and competitive, says Gary Ahlquist, a Senior Partner at Booz & Company, in the latest episode of Mergercast by Booz & Company.

This coming wave of merger activity may see up to 1,000 facilities change hands through the year 2020, he predicts.

“In this post-managed-care era, the integration of health providers will be driven by the need to align organizations’ core strengths so they’re better able to minimize financial risk while improving opportunity for profit. The trend will be most pronounced among organizations such as smaller, stand-alone institutions in competitive markets and inner-city safety net hospitals, which run particularly high risks. We’ll also see activity among religious-based institutions seeking affiliations and academic medical centers looking to expand their geographic reach,” Ahlquist says.

During the interview, he breaks these mergers down into a number of specific categories:

●    Scaled Portfolios, through which organizations that are currently spread across a broad geographic area will acquire undervalued institutions with complementary capabilities as they seek stronger operating performance and market density.
●    Geographic Clusters, where institutions in specific metropolitan service areas will build a high share across the continuum of services there.
●    The Hub and Spoke approach, whereby institutions position one medical center as their hub (often academic medical centers) and expand their reach and volume either contractually or by acquiring assets to build a network of “feeder” care delivery facilities.
●    Clinical Innovation initiatives, in which medical centers will leverage their excellence in one dimension of care delivery, such as research and clinical care, across various regions, including internationally.

Ahlquist provides additional detail about the coming wave of health provider consolidation during his conversation with Gerald Adolph, a Senior Partner at Booz & Company leading the firm’s Mergers & Restructuring group, in Episode 42 of Mergercast by Booz & Company.

For additional research on creating successful mergers in the hospitals and health systems sector, read the Booz & Company Viewpoint "Succeeding in Hospital & Health Systems M&A: Why So Many Deals Have Failed, and How to Succeed in the Future," available at: http://www.booz.co/109VqOu

About Mergercast
Mergercast by Booz & Company is a podcast series exploring the world of mergers, acquisitions and restructurings. The current episode, No. 42, “Health Provider M&A,” has a runtime of 18 minutes and 6 seconds. Listeners can play the podcast on its homepage (http://www.booz.com/mergercast) or subscribe via RSS feed, e-mail or the iTunes store.

About Booz & Company
Booz & Company (booz.com) is a leading global management consulting firm focused on serving and shaping the senior agenda of the world’s leading institutions. Drawing on the talents and insights of more than 3,000 people in 58 offices around the world, we help our clients achieve essential advantage by working with them to identify and build the differentiating capabilities they need to outperform.

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