Consolidation has touched all facets of healthcare, including hospitals of all sizes, medical groups and insurers, and this trend will significantly affect the industry as a whole.
Mergers, acquisitions and other types of partnerships are critical as hospitals focus on providing coordinated, cost-effective care. There has been an increase in hospital M&A in recent years, with transactions rising 18 percent in 2015 compared to the year prior, according to an analysis by Kaufman, Hall & Associates.
Through consolidation, hospitals become more efficient and, many times, improve care quality. However, consolidation also increases leverage and causes revenue to rise. This has led to the creation of “super regional systems,” says Gregory F. Hagood, senior managing director and president of SOLIC Capital. This trend is noted in almost every major market, but it is most visible in metro areas like Chicago.
The first wave of consolidation in Chicago began a few years ago and came to a head when Chicago-based Northwestern Memorial HealthCare closed its merger with Winfield, Ill.-based Cadence Health in September 2014. Under the agreement, Northwestern Memorial, a fully integrated health system, expanded to include four hospitals. After striking another deal with Dekalb, Ill.-based KishHealth last year, Northwestern Memorial HealthCare has six hospitals and a medical staff of more than 4000
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