By working together as a team, we can take this collaboration into new areas of our organizations to deliver greater clinical benefits to our patients.
By Arl Van Moore Jr, MD
Last year’s record-breaking deal-making activity among hospitals and health systems suggests that the market may be entering a new era of collaboration as the consolidation continues. Size and scale are the historical drivers of hospital merger and acquisition (M&A) activity, but the 2017 deals were different: Strategy not finance was behind the deal-making, according to a report from Kaufman Hall & Associates . Transactions involving higher-rated, healthy players exceeded those involving smaller more vulnerable providers. Dignity Health and Catholic Health Initiatives (CHI), Beth Israel Deaconess and Lahey Health, and now Ascension and Providence are all on the merger path.
The number of transactions in 2017 (115) barely exceeded those in 2015 (112), but the value of the announced activity was double that of 2015. Eleven of the deals announced in 2017 involve sellers with net revenue of $1 billion or more, and another 16 transactions involved hospitals with between $500 million and $1 billion in revenue. It’s not just the strong consuming the weak. Instead, what we are seeing are strategic alliances between market leaders.
What are providers trying to achieve with these deals? Kaufman Hall identified the following strategic factors in the merger between Dignity Health and CHI, which will rank as the nation’s largest non-profit system with more than $27 billion in combined annual revenues:
· expansion of community-based care to offer services in various outpatient and virtual settings,
· clinical programs focused on special populations and patients with chronic illness, and
· advancement of digital technologies and innovations.
The Practice POV
Viewing this activity from the physician practice setting, it is easy to understand the disruptive affect that hospital consolidation is having on medical practices, specifically radiology practices. When hospital systems merge, we start to bump up against each other in uncomfortable ways. Strategic alliances between health systems may require competing practices to become strategic partners, or they may threaten long-standing relationships between practice and client that do not fit into the new competitive landscape. What once was a familiar and predictable environment starts to feel uncertain.
We are at the beginning of this wave and although it is uncomfortable, independent radiology practices bring a strong game of their own to the arena. Take a look at the strategic objectives of Dignity and CHI above and you’ll recognize that Strategic Radiology practices have the ability to contribute at every level. This is why the national corporate consolidators are knocking on all of your doors—they recognize this too.
A founding principle of Strategic Radiology, collaboration has served us well. Our collective practices have learned from each other at every level of our organizations. The trust and generosity that has characterized this sharing of knowledge and expertise has benefited all. By working together as a team, we can take this collaboration into new areas of our organizations to deliver greater clinical benefits to our patients. As we work to grow Strategic Radiology, we might take a cue from the hospital world and forge those strategic alliances with partners that will be in the best interest of achieving our goals. Our ability to collaborate and build those alliances will be increasingly important in the months and years ahead.
If we continue to invest in ourselves both locally and as individual members of Team SR, Strategic Radiology practices have the opportunity to strengthen the services we provide and build unparalleled virtual scale, access to data, and the expertise that will enable us to compete regionally and nationally, while raising all of our games. And while the ingredients of money, servers, routers, or anything that can be bought or sold are important in the equation, the most important ingredient is the willingness to commit and the spirit of collaboration that has carried us to this point in time.
Strategic Radiology member practices have enjoyed the fruits of our collaboration for nine years. Now, we need to be the team that will protect, enable, and help ensure the future of our specialty.
Arl Van Moore Jr, MD, is chair and CEO, Strategic Radiology.
1. 2017 in Review. The year M&A shook the healthcare landscape. January 2018. KaufmanHall. Skokie, IL. Accessed February 27, 2018: https://www.kaufmanhall.com/sites/default/files/2017-in-Review_The-Year-that-Shook-Healthcare.pdf
Hub is the monthly newsletter published for the membership of Strategic Radiology practices. It includes coalition and practice news as well as news and commentary of interest to radiology professionals.
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