"Hospital mergers and acquisitions are on the rise."
We've heard or written variations of that statement what seem like a million times. It's not that it isn't true — in 2009, there were 52 hospital M&A deals involving 80 hospitals, and those numbers have increased each year since.
I'm not about to debate the merits or benefits of hospital mergers, which certainly have issues of their own. It's just that here at Becker's Hospital Review, rarely a day goes by where there isn't a hospital transaction to cover, which gives that statement an almost hackneyed taste.
That's why I was taken aback when I saw this week's news about Jefferson Health System in Radnor, Pa.
JHS is a fairly large system: It has $3.05 billion in revenue with solid profitability metrics. It's comprised of one of the most renowned academic medical centers along the East Coast in Thomas Jefferson University Hospitals in Philadelphia, as well as Main Line Health, a strong, four-hospital system based in the affluent suburbs surrounding Philly.
But JHS officials decided to split the corporate structure. By the summer, pending regulatory approval, TJUH and Main Line Health will become autonomous entities, managing their finances independently — essentially dissolving the "Jefferson Health System" name. They will, however, retain their clinical and academic affiliations.
It's not completely uncommon (though still somewhat rare) to see hospital and health system mergers unwind. Usually, it'll come at the hands of the Federal Trade Commission. Or the partners will call it off due to financial and cultural challenges, like what happened between Danville, Pa.-based Geisinger Health System and Penn State Hershey (Pa.) Medical Center in 1999.
But it struck me as odd that this large, financially sound health system would rather splinter in this day and age of hospital musical chairs than retain its size and combined market power. It essentially went against the drumbeats of today's healthcare experts who claim large systems are the only successful option for the future.
In the news release, TJUH President and CEO Stephen Klasko, MD, said the current structure of JHS needed to change to "allow us to be more entrepreneurial, nimble and responsive." It's unclear if that means TJUH and Main Line Health will now pursue new partnerships on their own. Regardless, it definitely appears they are taking different approaches to deal with healthcare reform than many other hospitals today.
Socrates is attributed with coining the phrase, "All I know is that I know nothing." While the JHS restructuring certainly isn't par for the hospital M&A course, it is a reminder that analyzing the sector is far from an exact science. The next time I write a variation of how hospital mergers are on the rise, I'll keep JHS — and Socrates — in mind.