HEALTH & LIFE SCIENCES NEWS
HEALTH & LIFE SCIENCES NEWS
Exploring Critical Business and Legal Issues across the Healthcare and Life Sciences Industries
HEALTH & LIFE SCIENCES NEWS
Exploring Critical Business and Legal Issues across the Healthcare and Life Sciences Industries
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Public Hospital M&A: Know Your Stakeholders

Hospital transactional activity has soared over the last decade, and many public hospitals are evaluating M&A opportunities against the backdrop of the Coronavirus (COVID-19) pandemic. In our previous post on public hospital M&A, we discussed financial pressures on public hospitals, trends driving M&A, and external factors shaping public hospitals’ choices of M&A partners and formats. In this installment, we’ll cover strategies for gaining stakeholder buy-in as hospital board members, senior leaders and advisors move through the transaction process. For a deeper dive into these topics, listen to our podcast, Driving the Deal: Public Hospital M&A and Stakeholder Buy-In.

Stakeholders: Who’s Who

Public hospital M&A is a team sport. Assessing and advancing a potential deal involves engagement with a wide variety of stakeholders, each with their own perspectives, objectives and priorities. Key players can include elected public officials, community leaders, hospital management and board members, physicians, employee unions, patients and the general public. It is critical to navigate the diverse viewpoints of these important stakeholders without ceding decision-making to a non-fiduciary.

As a first step in navigating that challenge, hospital boards should distinguish between stakeholders that have the right to approve or deny the proposed transaction, and those that are important to the deal’s success but do not have approval authority. Depending on the jurisdiction and deal structure, the former category of stakeholders could include the local municipality’s board, the State Attorney General or even registered voters, in the case of a public [...]

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Unpacking Differences in Public and Private Hospital M&A

Across the public hospital sector, M&A activity has increased significantly over the past decade. Given the current COVID-19 landscape, many are taking a hard look at their operations to garner a better understanding of what needs to be done to be regain level footing during a tough financial time, while also focusing on a need to uphold their community’s best interest. Broadly speaking, many public hospitals are the sole provider in their communities, so making the right M&A choice is vital – not only for them, but those they serve. Here we will discuss the pressures of public hospitals financially, the trends driving M&A and what external pressures are impacting these hospital’s decisions. For a deeper dive into the issues discussed here, listen to our podcast, Dealmaking in the Sunlight: Navigating Public Hospital M&A.

Financial Pressures

Standalone entities, like many public hospitals, often lack economies of scale and do not have the benefit of spreading risk across a larger organization to soften the economic blows impacting hospitals today. However, these struggles do not go unnoticed, as there are regulatory and legal frameworks in place to help public hospitals perform differently or better when needed. Certain government or municipal hospitals have immunity to antitrust laws, which allows them to partner with organizations within their market (“cross town competitors”).

M&A’s Potential Effect on Public Hospitals

M&A amongst hospitals and healthcare systems has been found to increase revenue, improve debt position, and attract resources to the community. Given that information, [...]

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