Tuesday, August 20, 2013

Every hospital merger is looking for a really good Tight End

Right now, Fantasy Football leagues are getting ready to establish teams and in most, a strange phenomenon will predictably occur that often changes the shape of each team’s draft.  In healthcare, a similar trend has begun that will change the landscape of hospital providers across the country as the industry enters a new era of mergers and acquisitions.

There are generally a few types of drafts that occur.  There’s an "Autopick Draft" option, in which the system automatically drafts players to each team and a “Keeper” league options where players can be carried over from the previous years.  There is also the most popular, “Live Draft”, which can take place Online with participants logged into the same website or Offline, perhaps at a single location where multiple owners will gather in-person to select their players in an actual draft.

During the “Live” drafting process, there is phenomenon that will inevitability occur at which point a “run” on certain position players happens.  Many drafts start out with the attention on RBs and QBs being selected followed by a wave of WRs (depending on the scoring).  However, maybe around the 4th, 5th, or even 6th round something extraordinary happens…..the first tight end (TE) gets selected. 

The TE is more of a niche position much like selecting a defense or even a kicker (well, maybe not a kicker).  There are only a few of really good ones and once the first gets selected, people usually react quickly or panic to make sure they’re positioned to get one of the good ones.

On June 24th, it was announced that Tenet Healthcare had agreed to acquire Vanguard Health Systems.  When the merger is finalized, Tenet will operate 77 hospitals in 30 markets, which includes Tenet's 49 hospitals in 24 markets and Vanguard's 28 hospitals in six markets.

Just a week later in a move of even greater magnitude, Community Health Systems (CHS) announced it will be acquiring Health Management Associates (HMA).  Now that the hospital operators in the on-again, off-again merger have decided to consummate their relationship, the two would create the largest U.S. hospital company by number of hospitals.  CHS will own and operate approximately 206 hospitals in 29 states with a total bed count of over 31,000 and be the No. 2 operator by revenue, with about $18.9 billion.

I’d like to suggest that in the healthcare industry, the “run” on TEs has begun!
Now that’s a bit of an exaggeration as a colleague pointed out, because these deals don’t take place over night and require significant due diligence to develop and come together. 

However, while hospitals are hoping for an influx of newly insured patients with health reform, they are also seeing cutbacks in government reimbursement such as Medicaid and Medicare.  Those cuts follow a trend of decreased patient volume, which has been seen as the aftermath to the recession but also representing efforts by insurers to reduce inpatient use.
Regardless of opinion, what is undisputable is that the hospital world is shrinking.  Healthcare futurists predict even more consolidation and a fewer number of hospitals as the way care delivery is provided continues to change.  In order to be successful in the future state, organizations are going to need to find the “right” partnerships and don't be surprised if there is a ripple effect as they’re going to want to make sure that they too.....have a really good tight end (TE).

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