Eleven metropolitan statistical areas have been opened up for hospital mergers and acquisitions under recent changes in federal antitrust guidelines, according to a release from Navigant Consulting.
A Navigant analysis based on federal changes in the Herfindahl-Hirschman Index indicates the status of the following markets has been changed from "moderately concentrated" to "unconcentrated": Baltimore, Boston, Detroit, Houston, Kansas City, Miami, New Orleans, Orange County (Calif.), Oklahoma City, San Francisco and Seattle. In addition, 23 metropolitan areas that were considered concentrated for hospitals are now considered moderately concentrated, but the Navigant release did not name them.
The guidelines, not updated since 1992, help the Department of Justice and the Federal Trade Commission analyze whether proposed mergers violate antitrust laws. The Herfindahl-Hirschman Index measures of the market power of organizations in each industry to determine the degree of competition.
Applying the new HHI thresholds to the 87 largest metropolitan statistical areas shows 41 percent are concentrated, 37 percent moderately are concentrated and 22 percent are unconcentrated.
Markets ripe for acquisitions
"Given multiple factors – economic struggles, soft demand, declining reimbursement and healthcare reform – the environment is ripe for more hospital M&A activity," said Chris Myers, director of healthcare practice at Navigant. "More hospitals are looking to join larger systems in an effort to gain access to capital, scale economies and specialized expertise, as well as to help respond to reform and lay the groundwork for becoming an accountable care organization."
Navigant says hospitals and health systems preparing for M&A conversations must first do the following:
Read the Navigant release on hospital mergers and acquisitions.
Read more on mergers and acquisitions:
- Recently Acquired and Merged Hospitals Asked for Greater Transparency on CEO Salaries
- The Impact of Healthcare Reform on Hospital Consolidation
- Federal Government Releases New Guidelines for Horizontal Mergers
A Navigant analysis based on federal changes in the Herfindahl-Hirschman Index indicates the status of the following markets has been changed from "moderately concentrated" to "unconcentrated": Baltimore, Boston, Detroit, Houston, Kansas City, Miami, New Orleans, Orange County (Calif.), Oklahoma City, San Francisco and Seattle. In addition, 23 metropolitan areas that were considered concentrated for hospitals are now considered moderately concentrated, but the Navigant release did not name them.
The guidelines, not updated since 1992, help the Department of Justice and the Federal Trade Commission analyze whether proposed mergers violate antitrust laws. The Herfindahl-Hirschman Index measures of the market power of organizations in each industry to determine the degree of competition.
Applying the new HHI thresholds to the 87 largest metropolitan statistical areas shows 41 percent are concentrated, 37 percent moderately are concentrated and 22 percent are unconcentrated.
Markets ripe for acquisitions
"Given multiple factors – economic struggles, soft demand, declining reimbursement and healthcare reform – the environment is ripe for more hospital M&A activity," said Chris Myers, director of healthcare practice at Navigant. "More hospitals are looking to join larger systems in an effort to gain access to capital, scale economies and specialized expertise, as well as to help respond to reform and lay the groundwork for becoming an accountable care organization."
Navigant says hospitals and health systems preparing for M&A conversations must first do the following:
- Weigh the pros and cons of keeping the status quo versus partnering with another health system.
- Familiarize yourself with the entire M&A process, including key terms, typical phases, activities, issues, the regulatory process and key decision points in each phase.
- Develop criteria to evaluate potential partners and use them to identify potential partners.
- Foster agreement on critical terms of the deal.
Read the Navigant release on hospital mergers and acquisitions.
Read more on mergers and acquisitions:
- Recently Acquired and Merged Hospitals Asked for Greater Transparency on CEO Salaries
- The Impact of Healthcare Reform on Hospital Consolidation
- Federal Government Releases New Guidelines for Horizontal Mergers