When the ball dropped on New Year's Eve, it ushered in more than the annual, half-hearted decision to diet and exercise? starting bright and early the next morning. Jan. 1 also rang in a renewed resolve by healthcare firms to consolidate, continuing a trend accelerated by healthcare reform. Health systems, physician groups, health plans, and other industry members have examined and implemented every possible consolidation model as a way to prepare for the upcoming changes facing the industry come Jan. 1, 2014.
In spite of the uncertainty that surrounded healthcare reform for much of 2012, it appeared that nothing could prevent consolidations. Mergers and acquisitions were hot topics in the early months, but efforts seemed to heat up during the latter part of the year with 350 deals worth nearly $37 billion recorded in the third quarter alone, according to Modern Healthcare. The U.S. Supreme Court's ruling in June and President Obama's re-election in November solidified the Affordable Care Act as the law of the land, giving a bit of certainty to the industry facing so much uncertainty in the coming years.
There was not a week that went by without news of consolidation proposals. Once bitter rivals agreed to play nice to ?better serve the community,? but wound up creating entities with even greater competitive advantage. Some smaller, community providers seemed to have targets on their backs, looking ripe for the picking of a larger system to enter a new market and reach new populations. However, some actually sought out a large health system to merge or partner with to better adhere to ACA rules and regulations.
Even the promise of increased Federal Trade Commission review has not scared off merging organizations, though some have thought twice before submitting a proposal. Most mergers have managed to pass review without any problems, but a few have been subject to closer examinations. There have even been some mergers blocked by the FTC, leading the Supreme Court to hear arguments on the subject of anti-trust. Given the Court's recent decisions regarding anti-trust in healthcare, it is likely that these mergers will be either abandoned or ruled against by the Court.
Unlike the forgotten gym membership, the industry is sticking with this new consolidation model. Within the first week of the New Year, new consolidation plans were announced and others were completed, officially kicking off what is expected to be a busy year for consolidation. While mergers and acquisitions will continue to be the consolidation model of choice, strategic partnerships have also emerged as a viable option for those wishing to benefit from outside resources and maintain their own identity within the community. Maryland health systems Shore Health System and Chester River Health announced their intent to merge into one large health system on Jan. 8, with an anticipated completion date of July 1, 2013. Meanwhile Albany, N.Y.-based St. Peter's Health Partners chose a partnership model with plans to partner with five local physician groups to form the physician-run St. Peter's Health Partners Medical Associates, an affiliate of St. Peter's health system.
So, cheers to another year full of consolidations, whatever form they may take. Next year the healthcare industry's resolution may be to recover from the hangover of merger mania.