2012 marked by innovative hospital mergers and acquisitions

As Baton Rouge readers may know, the emerging trends in health care reform have marked a departure from the traditional fee-for-service reimbursement model and begun to place an increasingly greater emphasis on reimbursing health care providers based upon quality and continuity of care. That shifting environment has presented new and interesting challenges for business law professionals as non-profit and for-profit hospitals alike explore non-traditional ownership models.

According to one report, hospital mergers and acquisitions increased nearly 20 percent in 2012 as compared to the previous year. Whereas 2011 saw 212 hospitals involved in merger and acquisition deals, that number rose to 352 in 2012. Last year’s total reflects an ownership change in more than 160 hospitals owned by 10 different non-profit organizations.

Although the transactional landscape in 2012 consisted of a significant number of traditional acquisitions, primarily of non-profit hospitals by other non-profit or for-profit entities, the year also saw its share of previously uncommon joint venture acquisitions.

A common theme appears to be the desire of non-profit organizations to form partnerships in the interest of financial stability while maintaining enough of an ownership stake to represent local interests and community needs. Other trending structural models include acquisitions of interests in hospitals by insurers in the interest of establishing integrated provider models.

Some industry analysts expect to see more non-traditional merger and acquisition models developing in the future. It may require some creative thinking by the community of business law professionals to efficiently coordinate and execute the cutting edge ownership transformations that may be necessary to keep hospitals financially viable.

Source: Modern Healthcare, “Taking a different path,” Paul Barr, Jan. 26, 2013