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Tips to better ensure a successful hospital M&A deal

Hospital merger and acquisition (M&A) deals continue to thrive through 2021. Just this month, Dallas-based Tenet Healthcare announced the sale of five hospitals to Steward Health Care. Those with information on the deal expect the billion-dollar deal to close in the third quarter of 2021. This is just one of a handful of deals that were announced this month. Other examples include Tennessee based LifePoint Health moving forward with the acquisition of Kentucky based Kindred Healthcare, another billion-dollar deal, and New Orleans based Ochsner Health joining Rush Health Systems.

The goals that motivate these deals may vary, but often include a desire to increase efficiency and improve patient care. Unfortunately, the deal does not always meet these goals. Instead, as noted in a recent study published within the New England Journal of Medicine (NEJM), these deals can lead to a decrease in patient experience, no evidence of quality improvement and an increase in prices by an average of 6 to 7%.

Why are these mergers failing?

Researchers with the study point out that hospital officials likely have the best of intentions at the outset of the deal. However, pressures to keep all staff and services while moving forward with expansion can make it difficult to keep prices level let alone reduce expenses.

What can hospital leaders do to effectuate change?

There are steps that can help better ensure the M&A deal achieves improved patient care while also reducing the overall cost of healthcare. First, it can help to review practices and services for redundancies. Once found, address and remove any unnecessary repetition.

The NEJM study also reports that patients experience better outcomes when surgeons narrow their focus and increase the number of procedures they complete. More specialization and experience with specific procedures often translates to an increase in quality care.

What else should hospital leaders know before moving forward with these deals?

It is also important to meet various legal requirements to better ensure the M&A deal moves forward. In many deals the transaction will stall if the parties do not properly complete the change of ownership documents as required by the Texas Department of Aging and Disability Services or neglect the 855 Applications for the Centers of Medicare and Medicaid Services.