Hospitals can strengthen their market power by making small tweaks to their payor mix, considering their holistic financial health and fostering relationships with other healthcare providers, among other tactics. Here are six factors to boost the market power of a hospital in regards to its attractiveness to potential buyers or partners.
1. Financial health — aside from profits. Financial criteria such as credit ratings, along with revenue, income, cash flow and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), help buyers determine the true performance of a facility.
2. Attractiveness of payor mix. Even if the mix is not ideal, a potential buyer may consider a hospital more attractive if it has taken initiative to improve it and established a variety of strategies to do so. Steps to do this may include recruiting top physicians or expanding into service lines that are more lucrative and/or have more commercial payors. Even if buyers see an opportunity, the hospital may seem more attractive and worth the pursuit.
3. Strength of the hospital's management team. While sellers may not be able to control their market, they can be sure to offer buyers a sound, concrete management team. Hospitals with sound business and revenue cycle practices, robust compliance programs and high quality are worth more than hospitals lacking in these areas.
4. Relationships with other providers. Hospitals will no longer be able to thrive as standalone, autonomous organizations. Ask how your hospital can best fit into a model of care delivery. Consider expand into post-acute specialties if not currently offered at the hospital, such as assisted living or rehabilitation facilities. Joint-ventures or the expansion of services can be accomplished with fairly low degrees of attention.
5. Plans to improve facility flaws. If you know facility changes are required, be proactive. These should be part of the plan you present to any potential acquirer or partner. Be prepared to document how the changes will improve your operations in terms of patient flow and revenue, the likely cost and how long it will take to complete improvements.
6. Workforce characteristics, such as unions, in the market. Markets with strong union presence may be less attractive to buyers since unions typically demand higher wages and benefits.
Read more about hospital M&A:
-10 Lessons From Leaders Who Have Merged or Acquired Hospitals
- 3 Questions to Ask Before Merging or Selling Your Hospital
- 5 Tips for Leading a Hospital Through a Merger or Sale
1. Financial health — aside from profits. Financial criteria such as credit ratings, along with revenue, income, cash flow and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), help buyers determine the true performance of a facility.
2. Attractiveness of payor mix. Even if the mix is not ideal, a potential buyer may consider a hospital more attractive if it has taken initiative to improve it and established a variety of strategies to do so. Steps to do this may include recruiting top physicians or expanding into service lines that are more lucrative and/or have more commercial payors. Even if buyers see an opportunity, the hospital may seem more attractive and worth the pursuit.
3. Strength of the hospital's management team. While sellers may not be able to control their market, they can be sure to offer buyers a sound, concrete management team. Hospitals with sound business and revenue cycle practices, robust compliance programs and high quality are worth more than hospitals lacking in these areas.
4. Relationships with other providers. Hospitals will no longer be able to thrive as standalone, autonomous organizations. Ask how your hospital can best fit into a model of care delivery. Consider expand into post-acute specialties if not currently offered at the hospital, such as assisted living or rehabilitation facilities. Joint-ventures or the expansion of services can be accomplished with fairly low degrees of attention.
5. Plans to improve facility flaws. If you know facility changes are required, be proactive. These should be part of the plan you present to any potential acquirer or partner. Be prepared to document how the changes will improve your operations in terms of patient flow and revenue, the likely cost and how long it will take to complete improvements.
6. Workforce characteristics, such as unions, in the market. Markets with strong union presence may be less attractive to buyers since unions typically demand higher wages and benefits.
Read more about hospital M&A:
-10 Lessons From Leaders Who Have Merged or Acquired Hospitals
- 3 Questions to Ask Before Merging or Selling Your Hospital
- 5 Tips for Leading a Hospital Through a Merger or Sale