The demands placed on healthcare providers today are sparking a new era of consolidation in the industry. Hospitals and health systems must reduce costs, improve quality and care coordination, and assume risk for patient populations to remain relevant in today's market.
Five years ago, many organizations reacted to these pressures through traditional means: mergers and acquisitions. Now organizations are pursuing new types of relationships – affiliations – which come in various shapes, sizes and intensities. These creative agreements also require different skills and capabilities from hospital and health system CFOs. Their world hardly revolves around a balance sheet anymore.
When evaluating a potential affiliate or integrating several organizations, CFOs are increasingly taking on a greater leadership role. They are more involved in discussions about clinical quality, patient satisfaction, operations and long-term organizational strategy. The checklist for due diligence has grown longer and more complex.
Based on survey responses from healthcare finance executives and a roundtable discussion with seven hospital and health system CFOs and M&A experts, this article addresses the consolidation pressures CFOs are experiencing, the types of affiliations they are entertaining or pursuing, and the traits they want most in a potential partner.