Blog Post

The Consolidation Fallacy


Navigating healthcare’s evolution to a value-centric payment system – and doing so in a financially responsible manner – is one of the greatest challenges organizations now face. The reality is, not all hospitals or provider groups will survive this transition on their own. Instead, many will need to band together with strategic partners to collectively combat increasing competitive, economic, and regulatory pressures. As a result, there is a prevailing system-wide perception that consolidation, by way of merger and acquisition, is the only answer for organizations seeking to achieve scale, enhance clinical integration, expand market reach, and preserve financial strength. Although consolidation may be an appropriate course of action for certain systems, the belief that it’s the most appropriate path for all organizations is a fallacy. What seems to be lost in this climate of consolidation is that scale and integration is effectively achieved in a variety of ways. Consolidation is merely one strategy among many that can put organizations in a position to realize their immediate and long-term goals.

Each organization possesses its own unique circumstances, characteristics, culture, and priorities. Accordingly, positioning strategies need to be clear and tailored to fit a specific vision. Partnerships, affiliations, joint ventures, network formation, and participation in accountable care organizations represent alternatives to consolidation that, when utilized effectively, can bring significant benefits to network partners as they position for the future. These benefits include:

The merger and acquisition of hospitals, provider groups, and service providers may align with the long-term positioning strategies of some systems. However, not all organizations have the resources, infrastructure, or desire to pursue consolidation strategies, and might be best served by using alternate vehicles in driving toward an optimal end state.

To learn more about positioning strategies, read the full article.