Would M&A benefit your rural hospital? 5 insights

While many larger healthcare organizations have announced proposed mergers or acquisitions within the past few years, rural hospitals have largely remained independent, according to a November report by the Rural Health Research and Policy Centers.

The report, written jointly with the RUPRI Center for Rural Health Policy Analysis at the University of Iowa in Iowa City, examines the national landscape of rural hospitals and health systems.

Researchers discovered that an estimated 208 rural hospitals have closed since 2005, and the trend is likely to continue. In 2016, another 175 rural hospitals were identified as being at risk of financial distress, according to data compiled by financial consulting firm Kaufman, Hall & Associates cited in the report.

As a result, rural hospitals should assess potential affiliation opportunities to increase their market strength. Even if an affiliation strategy seems unlikely, rural hospital leaders should "develop a thoughtful affiliation strategy that weighs the relative benefits of affiliation (in one of its many permutations) versus independent local control," the report finds.

Researchers outlined five steps rural hospital leaders should use to determine if a potential M&A deal would prove beneficial:

1. Understand what your facility should offer the community and region and whether a potential affiliation would help achieve that goal.

2. Ask hospital and community stakeholders to provide their input on the advantages and disadvantages of an affiliation, and what value the hospital may bring to the table.

3. Assess the hospital's current capabilities and financial resources to establish the hospital's value to stakeholders and potential partners.

4. Prepare a formal request for proposal for affiliation. A formal RFP may bring unexpected partners or reveal the hospital's openness to different structural options with partners in the same area or region.

5. Negotiate governance and control to protect existing stakeholders and hospital and board leadership.

To access the full report, click here.