Academic health systems are coming to the rescue of community hospitals through creative alignments, partnerships and acquisitions to ensure access to care.
Hospitals overall had a challenging 2023. While margins recovered for many after experiencing the worst financial year ever the year before, the recovery has been slow. Inflation and shortages continues to push up costs, and reimbursements haven't caught up. Many community hospitals also need to undergo infrastructure improvements and digital transformation, both of which are expensive.
Some hospitals have closed services, shut down departments or laid off staff in the last year due to financial constraints. When community hospitals close services, patients have to travel further distances to regional centers, often academic centers, which have become overcrowded.
Academic health systems and patients benefit when community hospitals provide more local care. That's one of the factors driving academic health system acquisitions. In the third quarter of 2023, academic health systems accounted for seven of the 14 transactions with a nonprofit acquirer, according to a Jan. 17 report from Kaufman Hall.
"Occupancy rates at academic health systems have been substantially higher than the median occupancy rate for hospitals and health systems overall, and a strong community hospital network allows academic health systems to ease some of the occupancy constraints at the academic medical center flagship by utilizing available space in high-quality community hospitals for lower acuity patients," wrote Anu Singh, managing director and practice leader of partnerships, mergers and acquisitions at Kaufman Hall.
Looking ahead over the next 12 months, Mr. Singh sees hospitals and small health systems continuing to seek partners amid financial struggles, and academic health systems are poised to step up.