National chains have best effect on acquired hospitals, survey says
Multistate chains may do a better job than local or regional systems at improving the financial performance of the hospitals they buy. A Deloitte analysis of 77% of hospital deals forged in 2007 and 2008 considered the performance of acquired hospitals through 2010. National chains take better advantage of workforce, supply chain and payer synergies, and they’re also more effective at increasing volume, according to the analysis.
“Size and scale are more important than they ever have been in the past,” said Simon Gisby, who leads the U.S. healthcare practice at Deloitte.
Yet the results weren’t consistent across the board. For instance, hospitals acquired by regional systems in 2008 had the fastest rate of change, improving their median margins (earnings before interest, taxes, depreciation and amortization, or EBITDA) by 388% in the first two years after the takeover—from -1.8% to 5.2%.
For that reason, Gisby noted, it’s not as easy as saying that national systems are better acquirers than regional ones.
“There are a lot of local factors that go into it as well,” he said, citing the partner’s cultural fit and ability to expand and differentiate services and attract physicians.
However, targets of national buyers still outperformed those acquired by regional ones in 2008, with their EBITDA margins improving from 3.9% to 10.3%. Volume during that time period also increased 51.4% for national targets compared with 5.3% for regional ones.
The survey looked at a total of 101 hospital acquisitions, about half of which (50) were a not-for-profit system acquiring a not-forprofit facility.
The remainder was evenly split (with 17 each) between a for-profit acquiring a notfor-profit hospital, a for-profit acquiring a for-profit and a not-for-profit acquiring a for-profit entity.
As a group, the acquired hospitals were performing below their peers during the year they were bought out—and while they did catch up, they were still languishing below the comparison group even two to three years after the acquisition.