Demonstrating Fairness in a Market Approach to Hospital M&A
Last year, we noted that the majority of hospitals and health systems are exploring their options when it comes to potential partnerships. We are starting to see more multi-state transactions that join non-profit health systems across state borders. This comes as organizations look to achieve the scale and geographic reach necessary to make a meaningful impact on population health and operational efficiencies.
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.