Rex Burgdorfer

Trader Joe’s has found great success while eschewing many traditional grocery store practices. This article explains how applying their values can also help a hospital stand out as a leader in care delivery.

In this guide Juniper Advisory and other healthcare transaction professionals explore the important points that leaders should consider and understand when evaluating and undertaking strategic organizational decisions like mergers and acquisitions. The compendium of articles offers a common-sense business person’s summary of topics and brings detailed technical analyses to key issues.

In this guide Juniper Advisory and other healthcare transaction professionals explore the important points that leaders should consider and understand when evaluating and undertaking strategic organizational decisions like mergers and acquisitions. The compendium of articles offers a common-sense business person’s summary of topics and brings detailed technical analyses to key issues.

This episode features Rex Burgdorfer. Rex is the Managing Director at Juniper Advisory. Here he talks the investment banking industry, specifically around mergers and acquisitions. They also discuss characteristics around a good investment banker, advice for people looking to become investment bankers, how he keeps himself motivated, and more.

The Federal Trade Commission (FTC) has provided new guidance on non-profit hospital business combinations that will result in more hospital transactions being reportable under the Hart-Scott-Rodino Act (HSR). Any affiliation that may result in a change in a hospital’s beneficial ownership, not just a change in governance, will likely now need to be reviewed by the FTC.

As a result, boards of hospitals that are pursuing a partnership will need to take extra measures to ensure that their… Show more

The Federal Trade Commission (FTC) has provided new guidance on non-profit hospital business combinations that will result in more hospital transactions being reportable under the Hart-Scott-Rodino Act (HSR). Any affiliation that may result in a change in a hospital’s beneficial ownership, not just a change in governance, will likely now need to be reviewed by the FTC.

As a result, boards of hospitals that are pursuing a partnership will need to take extra measures to ensure that their organizations:
• Demonstrate the rigor of their partnership selection and decision-making process.
• Document their objectives and the benefits of the partnership.
• Allow for additional time to close to accommodate HSR review. Show less

As transactions between large systems become more common, and more strategically focused on patient concentration and needs rather than geographic boundaries, state regulators are taking a closer examination of hospital business combinations.

From California to Illinois to Florida, state attorney generals have applied increased scrutiny to recent hospital transactions, regardless of tax status or ownership type. With healthcare expenditures increasing, consumers assuming a larger burden… Show more

As transactions between large systems become more common, and more strategically focused on patient concentration and needs rather than geographic boundaries, state regulators are taking a closer examination of hospital business combinations.

From California to Illinois to Florida, state attorney generals have applied increased scrutiny to recent hospital transactions, regardless of tax status or ownership type. With healthcare expenditures increasing, consumers assuming a larger burden of the cost of care, and competition between systems heating up, regulators will continue to have a watchful eye on healthcare M&A activity.

In considering a business combination, a hospital board must be sure to:
- Set goals to guide process decision making.
- Leverage a controlled competitive process to elicit the market’s most
optimal outcomes.
- Demonstrate that proposals were objectively assessed based on how the
terms met process goals.
- Be prepared to illustrate to stakeholders, including regulators, that the
process was robust and the resulting terms were fair and beneficial to the
hospital and its community. Show less

Financial difficulties are commonly the catalyst for hospitals to begin exploring partnership options. As Rex Burgdorfer, Juniper Advisory Vice President, outlines in his latest article “Valuing the Troubled Hospital”, court-led restructuring is an option often considered by those with liquidity constraints and significant financial liabilities.

For hospitals nearing the zone of insolvency, retiring funded debt, unwinding interest rate swaps, satisfying defined benefit pension plans and… Show more

Financial difficulties are commonly the catalyst for hospitals to begin exploring partnership options. As Rex Burgdorfer, Juniper Advisory Vice President, outlines in his latest article “Valuing the Troubled Hospital”, court-led restructuring is an option often considered by those with liquidity constraints and significant financial liabilities.

For hospitals nearing the zone of insolvency, retiring funded debt, unwinding interest rate swaps, satisfying defined benefit pension plans and covering post-closing risks are significant considerations when negotiating terms. Debt-heavy capital structures combined with today’s difficult operating environment has narrowed the margin of error for sellers. This reality places an increased importance on a complete, accurate valuation of a hospital’s assets and liabilities to guide mutually beneficial terms of a business combination.

These considerations should also encourage Boards of struggling non-profit hospitals to begin their partnership exploration process sooner, from a stronger financial position, and not delay until it’s too late to find a partner. Show less

We note how health systems will likely “pay” for their newfound acquisition appetite, and review techniques that are being utilized. The potential for an increased pace of change is focusing greater attention on the terms, conditions, and value exchanged (financial and otherwise) in business combinations.

Regulators are placing a heightened emphasis on “fairness” and “thoroughness” in board decision-making processes. Historically, there was a large divide in the approach taken by… Show more

We note how health systems will likely “pay” for their newfound acquisition appetite, and review techniques that are being utilized. The potential for an increased pace of change is focusing greater attention on the terms, conditions, and value exchanged (financial and otherwise) in business combinations.

Regulators are placing a heightened emphasis on “fairness” and “thoroughness” in board decision-making processes. Historically, there was a large divide in the approach taken by for-profit companies, non-profit systems, and independent hospitals. Those differences have narrowed substantially.

Many “currencies” in non-profit business combinations are non-financial in nature. Transaction features to which value is often ascribed by non-profit sellers in M&A transactions include:

1. Debt obligations of seller assumed by buyer
2. Capital commitments—typically over a 10-year horizon, including both routine and strategic projects
3. Local input and control retained by seller via board seats on parent board
4. Retention of certain rights by seller over local operations
5. Board composition and mechanisms for local input
6. Creation of enforcement bodies to ensure compliance with terms
7. Mission, vision, and values continued by buyer
8. Commitments to religious or related ethical directives by buyer
9. Retention of existing charity care Show less

As 2017 comes to an end, we thought it would be helpful to The Governance Institute membership to provide some observations regarding the state of health system merger and acquisition (M&A) activity, and specifically its impact on independent non-profit hospitals.

First, the industry remains among the most fragmented in the U.S. economy. It comprises over 6 percent of GDP, is capital intensive, regulated, and complicated. Despite this, there are more than 2,000 “companies” nationally… Show more

As 2017 comes to an end, we thought it would be helpful to The Governance Institute membership to provide some observations regarding the state of health system merger and acquisition (M&A) activity, and specifically its impact on independent non-profit hospitals.

First, the industry remains among the most fragmented in the U.S. economy. It comprises over 6 percent of GDP, is capital intensive, regulated, and complicated. Despite this, there are more than 2,000 “companies” nationally that own and operate the roughly 4,300 acute-care hospitals. As described in our previous article in Hospital Focus,¹ hospitals also operate with significant capital market limitations. These constraints combined with intense industry pressure has proven difficult.

Most health systems are now of the belief that the cost and quality equation could be improved by hospitals organizing into more effective regional networks. This holds the potential to coordinate care, share best practices, raise capital, implement IT systems, recruit physicians, and the like. Our team of investment banking professionals has yet to come across a hospital (whether a large system, prestigious academic medical center, or a small rural sole community provider). Show less

Board members of independent hospital companies are in the cross-hairs. They govern during a time of intense industry and societal change. Situated at the center of a national struggle, they contend with front-page news, and tweets, daily. Directors are challenged not only by these major economic and political issues but also by the tremendous volume of day-to-day operational detail involved in running a complex enterprise.

Jarrard Inc. Q&A with Rex Burgdorfer and Anne Hancock Toomey on the current M&A market for healthcare.

Downers Grove, Ill.-based Advocate Health Care and Evanston, Ill.-based NorthShore University HealthSystem terminated their proposed merger agreement March 7 after a federal judge granted a preliminary injunction to temporarily halt the merger.

U.S. District Court Judge Jorge Alonso granted the Federal Trade Commission and state of Illinois' request for a preliminary injunction to temporarily block the merger. His opinion, filed under seal, has not been released.

Here are five… Show more

Downers Grove, Ill.-based Advocate Health Care and Evanston, Ill.-based NorthShore University HealthSystem terminated their proposed merger agreement March 7 after a federal judge granted a preliminary injunction to temporarily halt the merger.

U.S. District Court Judge Jorge Alonso granted the Federal Trade Commission and state of Illinois' request for a preliminary injunction to temporarily block the merger. His opinion, filed under seal, has not been released.

Here are five reactions to the health systems' decision to discontinue their proposed merger. Show less

Membership substitution transactions are the most common form of business combination transaction in the nonprofit hospital industry. They are also widely misunderstood and the source of many mistakes. Many large 501(c)(3)s have become more acquisitive as a result of economic pressures of the ACA. Nonprofit health systems have been getting much better at participating in and winning competitive sale processes, resulting in an increased use of this business combination form.

The European Union is an affiliation. Unlike a federal government, the United States for example, where members combine into a single sovereign nation, each member state of the EU remains independent. The EU member countries gain a measure of collective strength and influence by ceding control over certain decisions, regulations and institutions to a central authority, but they remain sovereign and free to exit.

Sound familiar? This is the same type of arrangement as hospital… Show more

The European Union is an affiliation. Unlike a federal government, the United States for example, where members combine into a single sovereign nation, each member state of the EU remains independent. The EU member countries gain a measure of collective strength and influence by ceding control over certain decisions, regulations and institutions to a central authority, but they remain sovereign and free to exit.

Sound familiar? This is the same type of arrangement as hospital affiliations. Show less

As the delivery of health care continues to evolve and hospitals bear additional pressures to adapt to new payment models, more nonprofit hospitals are partnering with for-profit providers, through a sale, joint venture, or other arrangements.

Partnerships between independent nonprofit hospitals and larger health care systems (nonprofit and for-profit) have been growing over the past two decades. As more nonprofits look to the future, many have determined that to continue to offer… Show more

As the delivery of health care continues to evolve and hospitals bear additional pressures to adapt to new payment models, more nonprofit hospitals are partnering with for-profit providers, through a sale, joint venture, or other arrangements.

Partnerships between independent nonprofit hospitals and larger health care systems (nonprofit and for-profit) have been growing over the past two decades. As more nonprofits look to the future, many have determined that to continue to offer services to their communities and remain viable under health care reform, they must consider strategies that involve partnering with a larger, well-capitalized system. This is particularly true given the unique handicap imposed on nonprofit organizations; namely, having access to only one source of external capital—debt. This is also in direct contrast with other large industries in which equity and other capital markets can be readily tapped. As a result, many nonprofit hospitals are considering conversions into for-profit entities to gain access to capital. Show less

In its final season, "Downton Abbey" captured audiences by exploring a healthcare phenomenon set in rural England 100 years ago — and one still playing out across America today.

The phenomenon is hospital consolidation, and historical period drama "Downton Abbey" tackled it with the same gusto with which it took on the deterioration of class hierarchies, the emergence of the women's liberation movement and many other social issues over six critically acclaimed TV seasons.

At the… Show more

In its final season, "Downton Abbey" captured audiences by exploring a healthcare phenomenon set in rural England 100 years ago — and one still playing out across America today.

The phenomenon is hospital consolidation, and historical period drama "Downton Abbey" tackled it with the same gusto with which it took on the deterioration of class hierarchies, the emergence of the women's liberation movement and many other social issues over six critically acclaimed TV seasons.

At the beginning of the 20th century, hospitals in both England and America were much different places than they are today. They offered basic nursing services to keep patients as comfortable as possible and not much more. These institutions were most typically standalone facilities largely underwritten by local philanthropists. Show less

Independent hospitals and small health systems face a daunting challenge in developing their healthcare IT capabilities to meet the requirements of value-based care. But they must carefully weigh their options and proceed cautiously in meeting that challenge.

Health systems that lack the financial wherewithal to develop an electronic health record system on their own, and that are seeking an alternative strategy, should keep in mind five lessons learned by organizations that have faced a… Show more

Independent hospitals and small health systems face a daunting challenge in developing their healthcare IT capabilities to meet the requirements of value-based care. But they must carefully weigh their options and proceed cautiously in meeting that challenge.

Health systems that lack the financial wherewithal to develop an electronic health record system on their own, and that are seeking an alternative strategy, should keep in mind five lessons learned by organizations that have faced a similar challenge:
> Review the full range of options.
> Be realistic; Acknowledge the importance of strong management.
> Adhere to a budget.
> Reach out to peers.
> Be wary of competitors’ offers to help. Show less

Hospital joint ventures have progressed significantly over the past several years; they are now a viable option to help organizations provide services or enter markets they would otherwise be unable to access. They have progressed from a way to align with physicians to a means for building hospital systems and now to a potentially revolutionary approach to population health. This trend is a result of the mounting pressures hospitals and health systems face in the current healthcare environment.… Show more

Hospital joint ventures have progressed significantly over the past several years; they are now a viable option to help organizations provide services or enter markets they would otherwise be unable to access. They have progressed from a way to align with physicians to a means for building hospital systems and now to a potentially revolutionary approach to population health. This trend is a result of the mounting pressures hospitals and health systems face in the current healthcare environment. Yet, fundamental change in the hospital market also paves the way for innovative partnerships - including joint ventures. Show less

Business combinations between acute care non-profit hospital companies continue at a pace not seen since the 1990s. Participants are proactively entering the market for corporate control in an effort to forge partnerships that will position them to be successful in the future era of healthcare delivery.

This is not just a response to “Obamacare” or healthcare reform, but rather, critics say, is reflective of a system that delivers mediocre quality care at a high price, compared to other… Show more

Business combinations between acute care non-profit hospital companies continue at a pace not seen since the 1990s. Participants are proactively entering the market for corporate control in an effort to forge partnerships that will position them to be successful in the future era of healthcare delivery.

This is not just a response to “Obamacare” or healthcare reform, but rather, critics say, is reflective of a system that delivers mediocre quality care at a high price, compared to other industrialized countries. Some cite the level of ownership fragmentation as one of the leading causes. Improving a hospital’s root business fundamentals is more often the impetus for considering consolidation opportunities rather than the broader policy issue.

The 2000s were dominated by two trends: first “the bear hug” and second “the need for capital.” “The bear hug” is a common phenomenon whereby small Hospital A prematurely arrives at the decision that it makes sense to combine with Hospital System B, usually the closest sizable partner. While this conclusion is a natural inclination of the board, experience has shown that such outcomes are less favorable to Hospital A than for Hospital System B. Absent a rigorous, competitive process, Hospital System B is in full control of the transaction flow. The board of Hospital A has no basis of comparison with which to test the terms and conditions. It is surprisingly common to see a number of hospitals that have “given themselves” away. Show less

Since the enactment of the Affordable Care Act, the pace of hospital and health system consolidation has accelerated to a level not seen since the late 1990s, when hospitals were reacting to the formation of HMOs. The year 2013 saw a total of 87 consolidation transactions, following 105 in 2012. This volume represents a significant increase over 58, the median number of transactions completed each year between 2001 and 2011. Unlike the last wave of consolidation, which was driven primarily by… Show more

Since the enactment of the Affordable Care Act, the pace of hospital and health system consolidation has accelerated to a level not seen since the late 1990s, when hospitals were reacting to the formation of HMOs. The year 2013 saw a total of 87 consolidation transactions, following 105 in 2012. This volume represents a significant increase over 58, the median number of transactions completed each year between 2001 and 2011. Unlike the last wave of consolidation, which was driven primarily by financial
and reimbursement considerations, today’s hospital mergers are just as likely to be between financially strong partners as they are to be in response to challenged operations or economics. Hospital companies increasingly are turning to mergers and acquisitions as a tool to improve quality, manage risk, access capital and contend with the changing regulatory environment. The articles in this collection explore the drivers of the current wave of consolidation, address the causes of transaction failures and review the range of structural alternatives available in the marketplace. Show less

Describing Conemaugh Health's ~$500m partnership with Duke LifePoint.

The business of governing acute care health systems has become increasingly complex in recent years as board governance and industry structure have worked to keep up with the pace of reform and consolidation. The sector has evolved from a largely charitable function to a major industry that comprises 5 percent of the gross domestic product. The acute care health system business is capital intensive, highly regulated and technology driven.

Some industry observers point to the level of… Show more

The business of governing acute care health systems has become increasingly complex in recent years as board governance and industry structure have worked to keep up with the pace of reform and consolidation. The sector has evolved from a largely charitable function to a major industry that comprises 5 percent of the gross domestic product. The acute care health system business is capital intensive, highly regulated and technology driven.

Some industry observers point to the level of ownership fragmentation as a challenge to managing and improving acute care services in the United States. The hospital industry is composed of very small companies compared to similarly sized sectors of the economy. In other industries like managed care, airline, auto and food, beverage and tobacco companies, for example, the 50 largest companies hold market shares in excess of 75 percent. The 50 largest hospital companies together command less than 25 percent market share. The hospital industry has no "large" companies and none have full access to capital like major manufacturing companies have—e.g., commercial paper markets, equity markets, debt markets, synthetic markets, foreign listings, etc.

The passage of the Affordable Care Act and other macroeconomic initiatives are designed, in part, to stimulate the creation of larger health care companies that can deliver higher quality, more cost-effective care. Meaningful consolidation will be challenging and take time. Of the roughly 4,500 total acute care hospitals in the United States, there are more than 2,000 “companies” delivering care. With such fractured ownership, population health as well as standardized, efficient, consistent and coordinated care has been an elusive goal. Show less

The volume of business combinations involving non-profit hospitals is at the highest level of the last decade. The macro-economic forces spurring industry consolidation and rationalization are weighing heavily on management teams and boards around the United States. There is broad consensus that the fragmented ownership structure of the acute-care industry is, in part, responsible for the ineffectiveness of medical outcomes. The presence of a large number of small hospital companies has… Show more

The volume of business combinations involving non-profit hospitals is at the highest level of the last decade. The macro-economic forces spurring industry consolidation and rationalization are weighing heavily on management teams and boards around the United States. There is broad consensus that the fragmented ownership structure of the acute-care industry is, in part, responsible for the ineffectiveness of medical outcomes. The presence of a large number of small hospital companies has contributed to the widely held view that our hospital industry, in aggregate, delivers mediocre quality care at an extremely high cost. For these reasons, hospitals are attempting to form larger enterprises to create scale, expand geographically, manage risk, access capital, contend with the changing regulatory environment, improve operating skill, and to more effectively manage the health of the populations they serve.

Despite these strategic and financial imperatives, completing change-of-control transactions has become increasingly difficult. This is due, in part, to the level of financial liabilities found at many selling institutions. Regardless of transaction structure, satisfying liabilities has become an onerous part of completing merger and acquisition (M&A) transactions for both buyers and sellers. These challenges typically include: 1) retiring funded debt, 2) unwinding interest rate swaps, 3) satisfying defined benefit pension plans, and 4) the cost of tail insurance. Today’s historically low interest rate environment is partially to blame for the increased cost and complexity associated with satisfying these obligations at the closing of transactions. This article seeks to clarify these challenges and to provide recommended solutions to them when completing M&A transactions. Show less

Rex Burgdorfer and Jordan Shields delivered their keynote address titled “Considering the Role of Industry Structure” for the Western Regional Trustee Symposium, a gathering of hospital board members and executive leadership teams from a collection of 10 western state hospital associations.

The hospital consolidation market continues to gain steam. The year 2013 saw a total of 87 consolidation transactions, following 105 in 2012. This volume represents a significant increase over 58, the median number of transactions completed each year between 2001 and 2011. Consolidation transactions offer the possibility of achieving economies of scale, better access to capital, geographic expansion, and improved quality and clinician expertise. The vast majority of consolidation transactions… Show more

The hospital consolidation market continues to gain steam. The year 2013 saw a total of 87 consolidation transactions, following 105 in 2012. This volume represents a significant increase over 58, the median number of transactions completed each year between 2001 and 2011. Consolidation transactions offer the possibility of achieving economies of scale, better access to capital, geographic expansion, and improved quality and clinician expertise. The vast majority of consolidation transactions involve a nonprofit health system. In such cases, ultimately it is the nonprofit board’s decision whether, and under what terms and conditions, a hospital pursues a consolidation transaction. Show less

hree experts discuss the various issues influencing the sale of community hospitals.

At the Annual Becker's Hospital Review CEO Strategy Roundtable in Chicago on Nov. 14, Rex Burgdorfer, vice president of Juniper Advisory, Geoffrey Cockrell, JD, partner, and Holly Carnell, JD, associate, both at McGuireWoods, discussed key issues in the sale of community hospitals.

The discussion was moderated by Scott Becker, JD, partner at McGuireWoods and publisher of Becker's Hospital Review.

A successfully executed hospital transaction can make the process seem deceptively simple. But hospital mergers and partnerships are highly complex orchestrations that involve a considerable amount of risk.

Chicago-based law firm McDermott Will & Emery and independent investment banking firm Juniper Advisory collaborated to develop this whitepaper, which was co-authored by Rex Burgdorfer and Jordan Shields, both vice presidents at Juniper. The whitepaper covers five steps hospitals… Show more

A successfully executed hospital transaction can make the process seem deceptively simple. But hospital mergers and partnerships are highly complex orchestrations that involve a considerable amount of risk.

Chicago-based law firm McDermott Will & Emery and independent investment banking firm Juniper Advisory collaborated to develop this whitepaper, which was co-authored by Rex Burgdorfer and Jordan Shields, both vice presidents at Juniper. The whitepaper covers five steps hospitals should take when developing a hospital transaction strategy and process, and it also focuses on the exploration of partnership structures and components that make for a successful partner searc Show less

Describing Memorial Medical Center's decision making process in Ludington Michigan to merge with Spectrum Health.

ne idea that has gained a significant amount of traction in the past few months is that of "Big Medicine." Brigham and Women's surgeon and writer Atul Gawande, MD, propelled the phrase in his New Yorker op-ed last summer, in which he drew analogies between American healthcare and The Cheesecake Factory restaurant chain.

"Big chains thrive because they provide goods and services of greater variety, better quality and lower cost than would otherwise be available," Dr. Gawande wrote in the… Show more

ne idea that has gained a significant amount of traction in the past few months is that of "Big Medicine." Brigham and Women's surgeon and writer Atul Gawande, MD, propelled the phrase in his New Yorker op-ed last summer, in which he drew analogies between American healthcare and The Cheesecake Factory restaurant chain.

"Big chains thrive because they provide goods and services of greater variety, better quality and lower cost than would otherwise be available," Dr. Gawande wrote in the piece. "Size is the key. It gives them buying power, lets them centralize common functions and allows them to adopt and diffuse innovations faster than they could if they were a bunch of small, independent operations." Show less

Due to changing conditions in the healthcare environment, many hospitals believe it is time that they move away from independence and toward some form of a transaction. A transaction has the potential to be an effective move in dealing with challenges in the industry. However, hospitals need to be well advised in approaching transactions, and finding the right partner is a crucial step.

In a recent webinar hosted by McGuireWoods, Geoffrey Cockrell, JD, partner at McGuireWoods, and Rex… Show more

Due to changing conditions in the healthcare environment, many hospitals believe it is time that they move away from independence and toward some form of a transaction. A transaction has the potential to be an effective move in dealing with challenges in the industry. However, hospitals need to be well advised in approaching transactions, and finding the right partner is a crucial step.

In a recent webinar hosted by McGuireWoods, Geoffrey Cockrell, JD, partner at McGuireWoods, and Rex Burgdorfer, vice president at Juniper Advisory, discussed objectives a hospital board should have during a transaction process. These objectives will help guide the board toward the right partner. Show less

On Oct. 31, 2012, Beaumont Health System and Henry Ford Health System announced that they had signed a letter of intent to combine their operations into a $4.6 billion organization. The announcement followed less than two weeks after Trinity Health and Catholic Health East (CHE) went public with the news that the two Catholic healthcare systems intend to merge. The combined Trinity/CHE system will have annual operating revenues of about $13.3 billion and assets of about $19.3… Show more

On Oct. 31, 2012, Beaumont Health System and Henry Ford Health System announced that they had signed a letter of intent to combine their operations into a $4.6 billion organization. The announcement followed less than two weeks after Trinity Health and Catholic Health East (CHE) went public with the news that the two Catholic healthcare systems intend to merge. The combined Trinity/CHE system will have annual operating revenues of about $13.3 billion and assets of about $19.3 billion.

Discussing both the Beaumont/Ford and the Trinity/CHE mergers, representatives acknowledged the changing healthcare environment and the need to deliver integrated care and focus on population health. According to Rex Burgdorfer, an investment banker with Juniper Advisory, which is actively advising several hospital boards of directors in the state, “the mergers have added to the sentiment among smaller systems and independent hospitals that staying the course may no longer be a viable option for institutions committed to fulfilling their mission to serve the community.” Show less

Healthcare reform will result in more consolidation and integration among hospitals, reversing a recent trend in which hospitals tended to stay away from such transactions. Regardless of the ultimate fate of the Affordable Care Act, healthcare reform is becoming a powerful catalyst for consolidation and integration in the hospital industry.

Healthcare reform will impact hospital consolidation in three key areas:
- Payment rates will decrease, indirectly encouraging consolidation by… Show more

Healthcare reform will result in more consolidation and integration among hospitals, reversing a recent trend in which hospitals tended to stay away from such transactions. Regardless of the ultimate fate of the Affordable Care Act, healthcare reform is becoming a powerful catalyst for consolidation and integration in the hospital industry.

Healthcare reform will impact hospital consolidation in three key areas:
- Payment rates will decrease, indirectly encouraging consolidation by forcing hospitals to find new ways to reduce costs and increase negotiating clout with suppliers and payers.
- The cost of doing business will increase as hospitals spend more on compliance, technology, and physician employment.
- The ACO model will encourage hospital network formation by rewarding integrated healthcare systems that can reduce costs and improve quality. Show less

When evaluating change-of-control transactions, hospital boards need to be cognizant not only of their fiduciary duties to the corporation, but also of how their decisions will impact the broader community. Selling a hospital, especially to an out-of-town buyer, is a politically charged issue that frequently brings emotional responses from the community. If not handled correctly, public concerns can gain momentum and derail transactions that boards have specifically structured to meet the… Show more

When evaluating change-of-control transactions, hospital boards need to be cognizant not only of their fiduciary duties to the corporation, but also of how their decisions will impact the broader community. Selling a hospital, especially to an out-of-town buyer, is a politically charged issue that frequently brings emotional responses from the community. If not handled correctly, public concerns can gain momentum and derail transactions that boards have specifically structured to meet the long-term healthcare needs of their communities. There have been repeated public relations disasters in which communities rightly or wrongly concluded that their hospital was sold out from under them without adequate disclosure or community input. To ensure a successful outcome, it’s important to design a transaction process that anticipates community concerns and addresses them proactively and transparently.

This article suggests a number of strategies to ensure that community concerns are appropriately addressed in the design and implementation of a process, before they put transactions at risk. Within the context of the board’s fiduciary duties, we will review the role of community leaders (including the often conflicting objectives of boards, management, staff, local government, physicians, and business leaders), securing investments in the community, the provision of charity care, and local control. A well-considered anticipatory public relations strategy can defuse many of these issues before they gain momentum. Conducting a thorough, exhaustive, and open process with the assistance of a public relations firm is one of the key elements of securing regulatory approval for the transaction. Ultimately, this supports the board’s goal of ensuring the long-term provision of quality healthcare for its community. Show less

Economic and health policy experts seem to agree that healthcare delivery is a “market failure.” The U.S. spends much more on healthcare than countries with similar economies—16 percent of the gross domestic product. This puts U.S. businesses at a competitive disadvantage in the global marketplace and acts as a drag on the economy.

Despite spending twice as much as most major industrialized countries on healthcare, the outcomes associated with these expenditures are mixed. We trail other… Show more

Economic and health policy experts seem to agree that healthcare delivery is a “market failure.” The U.S. spends much more on healthcare than countries with similar economies—16 percent of the gross domestic product. This puts U.S. businesses at a competitive disadvantage in the global marketplace and acts as a drag on the economy.

Despite spending twice as much as most major industrialized countries on healthcare, the outcomes associated with these expenditures are mixed. We trail other countries in most measures of health quality (e.g., infant mortality, life expectancy, and disease prevention). This is not new; many of the same issues and concerns have been discussed over the past twenty years. Healthcare executives and leaders have been calling for the creation of larger hospital “systems” for at least a decade. Show less

Although healthcare transactions are prevalent, they are not always well received by physicians, nurses and the community. As soon as any sort of management or governance deal between two hospitals or health systems is announced, anxiety among employees and physicians may develop. As the deal progresses further, rumors about the future of the organization, its employees and its stakeholders may also develop. Hospital executives need to realize that no matter what they do, rumors — both positive… Show more

Although healthcare transactions are prevalent, they are not always well received by physicians, nurses and the community. As soon as any sort of management or governance deal between two hospitals or health systems is announced, anxiety among employees and physicians may develop. As the deal progresses further, rumors about the future of the organization, its employees and its stakeholders may also develop. Hospital executives need to realize that no matter what they do, rumors — both positive and negative — will spread. The best method to get ahead of negative rumors is to effectively and strategically communicate to the hospital's audience early on in the process.
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