As has been true in years past, recent industry consolidation and attempts to leverage size and scale are being used to stave off competitive threat. In the 1990s, hospitals and systems embarked on massive affiliations and buying sprees. Independent hospitals fled to the safety of systems. Hospitals scooped up primary care practices as a defensive maneuver to protect the referral base for lucrative specialty services. A great many of those ventures didn’t pan out as expected. Some hospital systems overpaid for the assets they bought. Still others couldn’t get the productivity gains they’d envisioned, learning the hard way that employed physicians aren’t the same as private practice doctors, and managing small businesses requires a nimbleness and focus that most large, siloed bureaucratic institutions couldn’t master. Not unlike other mergers or acquisitions across industries, the failure rate was quite high… frequently due to cultural incompatibility.

We’re likely to see a repeat of the 90s in the next 5 years unless better discipline is applied to the hard work of merger/acquisition integration. We’re already seeing physicians exiting private practices in droves to become hospital employees. But remember, getting the deal inked is typically the easy part!

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