All about al­lo­ca­tion

Modern Healthcare - - Opinions Letters -

Per­haps the re­silience of stand-alone hos­pi­tals shouldn’t come as such a sur­prise (“The few, the proud ...” July 26, p. 6).

For many months now, fi­nan­cial ad­vis­ers, rat­ing agen­cies and oth­ers with a vested in­ter­est in see­ing the num­ber of merg­ers rise, have been try­ing to stam­pede stand-alone hos­pi­tals into the arms of larger hos­pi­tals and health sys­tems by ar­gu­ing that size equates to fat­ter mar­gins and bet­ter sus­tain­abil­ity.

There is plenty of ev­i­dence in other in­dus­tries that this is a weak ar­gu­ment. The 2.3% me­dian op­er­at­ing mar­gin and im­prove­ment in days cash on hand for solo hos­pi­tals in 2009 sug­gests it’s a weak ar­gu­ment in health­care as well. There are of­ten good strate­gic ar­gu­ments for a merger. But big isn’t al­ways bet­ter. And large en­ter­prises in­vari­ably have more mouths to feed. Cap­i­tal ac­cess isn’t the is­sue; cap­i­tal al­lo­ca­tion is the is­sue. Dan Beck­ham

Pres­i­dent Beck­ham Co. Bluffton, S.C.

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