All about allocation
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.