Strategic considerations and preparation for healthcare reform were the primary drivers for the highest consolidation activity in the hospital market since 2000, according to a new Fitch Ratings report.
Traditional factors such as economies of scale, access to capital and market share continue to play a role in hospital consolidation, but expected reimbursement reductions and changing reimbursement methodologies have been forcing providers to operate more efficiently and improve coordination, pushing providers toward consolidation more than the other factors.
According to the report, providers are also considering new strategies, which introduce execution risk, and strategic partnerships may mitigate some of those risks. For this reason, the pursuit of consolidation is high, dramatically altering the landscape for U.S. hospitals.
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Traditional factors such as economies of scale, access to capital and market share continue to play a role in hospital consolidation, but expected reimbursement reductions and changing reimbursement methodologies have been forcing providers to operate more efficiently and improve coordination, pushing providers toward consolidation more than the other factors.
According to the report, providers are also considering new strategies, which introduce execution risk, and strategic partnerships may mitigate some of those risks. For this reason, the pursuit of consolidation is high, dramatically altering the landscape for U.S. hospitals.
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Think Strategy Before Partner During Hospital Transactions