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The New Standard for Market Relevance: Mergers, Partnerships, Scale, and Other Strategies for Developing the Indispensable Health Network

By The SHSMD Team posted 08-28-2018 01:22 PM

  
Three out of four hospitals or health systems consider themselves to be in an extremely or very competitive environment. Another 20 percent consider their environment to be somewhat competitive and only 4 percent say that their environment is not at all or not too competitive. (Source: By the Numbers 6th edition.) 

Almost half of all hospitals consider merger and acquisition activity in their area to be extremely or very extensive and only 3 percent say that it is not at all extensive. (Source: By the Numbers 6th edition.)

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In 2017, one in three hospital executives thought it at least somewhat likely that their hospital or health system would enter into a merger or other affiliation with a nonhospital provider, such as a pharmacy retailer or grocery store chain by 2022. (Source: Futurescan 2017.)

Also in 2017, more than three quarters of hospitals thought it at least somewhat likely that their hospital would grow financially at a slower rate than that of the general economy by 2022. (Source: Futurescan 2017.)

In December, 2017, Moody’s lowered its rating for non-profit and government hospitals from Stable to Negative.

In this environment, what can hospitals and health systems do to ensure that they are strong enough to serve all the needs in their communities?

Simply being stable financially at the moment is no guarantee of strong bond ratings. Raters are just as aware as hospitals of the uncertainty and disruption that threaten to overwhelm the unprepared. Raters examine factors such as covered lives and revenue, partnerships, scale, and even less quantifiable factors such as strategic direction.

Partnerships are one of the new fundamentals. No single organization can go it alone. The right partner can increase scale, add valuable expertise or reach, and multiply each participating organization’s capacities, but the wrong or poorly adopted partnership can lose money, time, opportunities, and reputation. Strategy offices and teams need to be able to lead market analyses and market forecasts, not just for themselves and their position, but of potential strategic partners. Partnerships take much more than good will and a shared intent: They need a full integration and change management plan to succeed.

As value-based reimbursement continues to grow, almost one-fourth of hospital executives think it very likely that half or more of their payment will be population-based (their organization will receive a set fee to care for a specific group of patients). (Source: Futurescan 2017.)

Hospitals and health systems are partnering with third-party payers, whether through provider-sponsored health plans, ACOs, narrow networks, or other network agreements.

On Saturday, October 6, at Executive Dialogue, a preconference event for the SHSMD Connections annual conference, join an intimate gathering of strategic leaders from S&P Global, Silver Cross Hospital, Stanford Health Care–ValleyCare, Northwell Health, Tufts Health Plan and AVIA to discuss these issues. The event will be led by Ken Gacka, Ruth Colby, Scott Gregerson, Jeffrey Kraut, Derek Abruzzese and Eric Langshur.

Registration is now open the event can be attended in addition to the SHSMD Connections or on its own.
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