Hospitals are hot for collaborative strategies

Few expect to remain freestanding

In our continuing effort to help readers stay on top of emerging trends in health care, Healthcare Benchmarks spoke to Rufus Harris, principal in the Westmont, IL-based health care consulting firm TriBrook/AM&G L.L.C., about collaborative strategies hospitals are pursuing.

Following are Harris’ insights as well as a chart (see chart on Collaboration Alternatives, below) from the firm’s 1997 National Hospital Merger and Acquisition Survey, based on a random sample of 106 U.S. short-term, non-federal hospitals. (For more information on integrated health systems, see Healthcare Benchmarks, October 1998, pp. 145-151.)

• Affiliations are the most frequently pursued collaborative strategy, but they aren’t necessarily the most effective. "No one really wants to merge, so they’re choosing non-asset based affiliations that are less threatening," Harris says. "The problem is that hospitals don’t have much incentive to change. It’s unlikely that one hospital in an affiliation would close a redundant program, for example."

• Mergers and acquisitions will also be pursued. The primary driving reasons include increasing managed care contracts, reducing operating expenses and capital expenditures, and improving community health. Employer pressure is an emerging factor, Harris says. Only 11% of survey respondents expect to remain freestanding. "Those who expect to be independent tend to be the sole provider in the community," he says. "If there’s not a lot of competition, collaborative strategies are less critical. But if there is, it may be something you want to consider."

• Mergers and acquisitions, shared services, and service trades are the most successful strategies.

• Although economics are the primary reasons for collaboration, attitudinal factors such as autonomy, trust, and vision are equally important.

• Vision, image, and ethics are the most important factors in selecting partners. The top reasons for failed collaborations include loss of local autonomy, lack of trust, lack of shared commitment and vision, and lack of flexibility.

To get a copy of TriBrook/AM&G’s 1997 National Hospital Merger and Acquisition Survey, call (630) 990-8070. Or write 999 Oakmont Plaza Drive, Suite 600, Westmont, IL 60559-5504. On the Web: www.amgnet.com.