Non-Profit Hospital Boards and the Merger Market

Non-Profit Board and the Merger Market Cover - 1 of 2During this decade, non-profit boards have been confronted increasingly with the potential for merger and change-of-control (“merger market”) transactions. There has been a dramatic increase in the need for non-profit organizations to consider macroeconomic industry conditions and the resultant role of the merger market. Hospital and health system boards of directors must be proactive and take into account their business and financial circumstances in relationship to this phenomenon. This article explores the industry dynamics that have contributed to this trend and notes an emerging view that may contribute to future merger transactions.

Historically, non-profit hospitals and health systems have focused on operating and other microeconomic issues and have considered the merger market only after experiencing financial trouble for several years. As a result, mission and value are often eroded. Today, however, the boards of some of the most successful systems are carefully considering the impact of fundamental changes in the structure of the hospital industry and are becoming more offensive in their thinking about the merger market. We suggest that boards consider the merger market in a proactive way, regardless of their circumstance.

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