eMagazine June 2023

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Global Health
eMagazine
June 2023
Global Local
Section Editor: Ritesh Vidhun
Merge & Acquire: The Modern-Day Business of
Running a Hospital
Written by Ritesh Vidhun
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Hospitals in America have gone through significant changes
over the past few decades. The 21st century brought a wave
of advanced technology and treatments along with a wave
of steadily increasing costs. Many providers across the United
States have relied on smaller high-cost populations but as the
industry moves toward value-based payments, many institutions are looking to merge with
larger groups in order to avoid financial struggles. This leads to larger organizations being able
to control a greater share of the market while having more influence over costs. The increased
number of hospital mergers and acquisitions has an overall negative impact on healthcare in
the U.S. due to lower competition and higher prices.
The Increase in Hospital Mergers and Market Consolidation: Currently, the top 10 health
systems in the United States, which include names such as HCA Healthcare, Ascension, and
Trinity Health, control around 24% of the market.1 This staggering number has only been growing
over the last decade, with increased hospital mergers & acquisitions (M&As) across the nation.
There were a total of 92 M&A deals in 2019, slightly higher than the 90 in 2018 and lower than the
117 in 2017.2 In 2020, challenges brought about by the pandemic attributed to a lower number
deals at 79.
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What Factors Have Led to This Trend? When examining the increased levels of hospital mergers
and acquisitions in the U.S., understanding the principle roots of the trend are important in
navigating the complexity of the topic. One of the primary reasons for the growth of M&A
deals can be attributed to the shift toward value-based payment reform. Many providers,
particularly smaller ones, seek to join larger systems in order to reduce the burden of financial
risk. Additionally, merging helps smaller hospitals gain access to more advanced technology,
increased standardization, further coordination, and better financial support. Utilization has
also been generally declining over recent years, especially during the pandemic. With lower
levels of health care spending by the American population, many providers face significant
challenges in maintaining their revenue and profits. After all, running a hospital in the U.S.
requires some level of business strategy and executives are looking for more ways to stay afloat
in this challenging economy.
Although publicly, hospital groups state
that the main motivations for mergers
and acquisitions are to improve quality
and access for patients, there are a
series of financial gains that must be
explored. Especially in smaller urban or
suburban communities, when multiple
hospitals combine, insurers are less
likely to exclude one from the network
despite greater prices or lower quality.3
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