As the pressure to deal with a dynamic market and changing regulatory environment continues to increase, many hospitals are considering some form of affiliation or acquisition to bolster their competitive position.  Healthcare consolidation is driven by a number of factors, most often including the need to build referrals, gain market share, or broaden service offerings as hospitals face pressure to maintain their market position (and revenue), compete for physicians, reduce costs, and improve quality.  Not surprisingly, many hospitals — as many as three-fourths by some estimates — are examining possible affiliations or acquisitions.

Remaining competitive is a growing challenge, and often the underlying motivation for acquisition.  Profit centers like orthopedics are increasingly likely to face competition from a regional provider positioned as a ‘destination’ for specific medical services.  Smaller hospitals see improved access to capital, technology sophistication and other support services, and a broader more sophisticated service array in affiliation with a larger system.  Finally, many hospitals struggling with weak profits believe they need to merge or affiliate with a larger health system to remain viable.  Despite these pressures, leadership must avoid being reactive, and take the time to carefully analyze their specific situation and goals.  Leadership must be thoughtful about their affiliation strategy.

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