At the Becker's Hospital Review 5th Annual CEO Strategy Roundtable on Nov. 14, 2013, industry experts discussed the future of independent community hospitals and various options for survival as healthcare continues to change.
Greg Koonsman, senior partner of VMG Health, James J. Agnew, FACHE, managing director of Huron Healthcare and Joseph R. Lupica, chairman of Newpoint Healthcare Advisors shared insight into the different options community hospitals have when choosing between independence and joining a larger hospital or health system during a session moderated by Becker's Hospital Review editor Bob Herman.
Each panelist agreed that there is a wide spectrum of affiliation structures to choose from. There is no longer a black and white choice between independence and sale. "Not everything has to be a full sale or merger," said Mr. Agnew.
Of all of the hospitals in the country, 85 percent are not-for-profit, many of which are standalone community-based hospitals. "More than half of the market is trying to decide where to go in an uncertain future," said Mr. Koonsman. The current state of the market is necessitating hospitals to initiate aggressive, capital-driven strategies, such as physician group acquisition, but there is a lack access to capital.
Whether deciding to join with a larger partner or remain independent, community hospital leaders need to engage in productive dialogue with their governing board. Asking the right questions will determine the value of a community hospital and whether it can remain independent.
• Does the hospital have a strong clinical team?
• Where does the hospital stand with its competition?
• What does the hospital's bottom line look like?
• Does the hospital's current operation appear sustainable?
The answers to questions such as these will help a community hospital board and its leaders determine if the hospital's greatest value remains in independence or as a strategic partner.
If a transaction, whether a merger, affiliation or sale, should be approached carefully. Too often community hospitals rush into a partnership to mitigate risk and find themselves unprepared for the agreement. "Be careful about going to dinner with the big health system down the street. You may open the menu and find you're on it," said Mr. Lupica. Discuss shared expectations up front. The majority of failed transactions are due to lack of communication.
The community hospitals that will remain viable as independent entities will have a strong clinical team, a good balance sheet and bottom line and most importantly a tight control over costs. With an uncertain, unstable future ahead of healthcare, the ultimate question traces back to the community hospital legacy: what is best for the community. "Sometimes the thorniest questions in our industry can be answered by asking what is best for the patient," said Mr. Lupica.