The business dynamics are always on a constant change for businesses in different sectors; the same goes for healthcare businesses. Cognizant of this trend, health care providers are always on the lookout to identify business deals that will guarantee their tremendous growth and market expansion.
Mergers and acquisitions have always been preferred options when a company intends to scale their business operations, as Stoneridge Partners explains. The past decade has been dominated by rampant health care mergers; technological advancement and increased cost of operations seem to be probable causes for these mergers. These challenges have always compelled hospitals or healthcare businesses to seek for merger deals to streamline their processes for enhanced growth and quality service delivery.
Health care mergers will intensify in the coming years because of the following reasons:
Need to Achieve Economies of Scale
Independent care providers and clinics constantly face the limitation of resources when it comes to their scalability, acquisition of products, and streamlining their processes. This challenge sets them back against their competition, reducing their chances for growth while maintaining the desired quality of care.
However, mergers provide access to exhaustively defined and streamlined procedures and processes, making it easy to produce more with less and meet and satisfy the needs of a larger group of patients without compromising on care quality or straining their personnel.
Cost Reduction and Market Share Increase
Mergers create strong synergies between the parties involved. This process achieves its credibility due to the possibility of reviewing operational costs and aiming towards a profitable front.
The reduction of overhead costs can be made possible through consolidation of processes to seal loopholes and having an efficient system in place which will drive the healthcare provider to more profitable processes.
Mergers occur mainly because of this reason – reduction of operational and overhead costs without any compromise to the provision of care, allowing the provider to channel resources and manpower to market reach expansion strategies.
When hospitals are able to cover a wider geographical area with fewer costs while making health care access easily available and affordable, customer satisfaction can be easily achieved.
Need to Provide Quality Care and Stay Profitable
Smaller healthcare companies cannot afford to consistently supply quality products and services and still manage to be sound financially. The demand for health care is currently high and set to rise in the coming years, so small healthcare providers are likely to struggle with maintaining the quality of their services without increasing the cost of care.
This complication pushes most of the clinics and smaller entities to consider mergers so they can achieve a quality practice without driving operational and overhead costs extremely high. This a strategic decision is not only for the healthcare provider’s survival but also its profitability.
To Improve Patient-Care Access
When a smaller hospital or independent clinic can no longer satisfy the needs of the patients due to overwhelming demand, a merger seems like a good solution. Failure to consider this option, patients will run the risk of losing access to health care within their locale.
Pumping more resources into an independent facility and acquisition of more skilled personnel enables the healthcare provider to withstand the challenges of the healthcare business while still enabling patient-care access.
Diversification of Services
Despite quality practice coming first as far as patient care is concerned, health care providers also consider the services provided within the facility in terms of return on their investment.
Mergers tend to bring in additional services into the facility considered to be of great need within a given geographical area. For example, there may be a lack of quality surgical services in an independent facility and the demand for the same is enormously high.
A merger with a more established facility will enable the provision of such a service to the patients without any compromise in quality and more focus on patient satisfaction. Diversification of services creates multiple streams of income and this is a good strategy for any facility.
To Survive a Financial Crisis
Mergers often occur during the breaking point of a healthcare facility. This is the point where the business is not profitable anymore, struggles with a less dedicated workforce, fewer resources, and at very great risk of closing shop.
Technology will continue in the coming years to influence the trajectory of health care globally; acquisition of technological systems and software comes with huge cost implications that smaller facilities will not manage. The inability to acquire these advanced technologies will alter the quality of care, rendering the facility unable to deliver certain services; these events are likely to create a financial hiccup due to unprofitability.
To avoid this from happening, mergers allow the business to survive and continue with its operations.
Health care mergers will no doubt keep growing moving forward as independent providers, clinics and smaller facilities need more resources to scale up their operations, expand the provision of care to a wider geographical area and reduce the cost of healthcare access.
However, the downside of this trend, especially in the future, will be the risk of having monopoly players in the health care business. The presence of huge corporations in health care and their subsequent expansion to different geographical areas will like to alter the quality of care and the cost. This is mainly due to the lack of stiff competition from other health care providers, and competition always drives the quality of products and services to the highest level.
From a strategic point of view though, for clinics and independent health care providers, mergers are often a very suitable strategic move to enable them to achieve growth through economies of scale which drive operational costs down and allows the facility to be more profitable.