625 625 Hospital M& A numbers Hospital M& A numbers From - PDF document

_________________________ _________________________ Alternatives to a Alternatives to a Merger or Acquisition Merger or Acquisition _________________________ _________________________ Dan Mulholland, J.D. Steve Rivkin Steven Tringale “The ACA will accelerate hospital “The ACA will accelerate hospital mergers, Moody’s says” mergers, Moody’s says” – Modern Healthcare – Modern Healthcare “The ACA has unleashed “The ACA has unleashed a merger frenzy” a merger frenzy” – Former FTC deputy director – Former FTC deputy director 625 625 Hospital M& A numbers Hospital M& A numbers • From 2007 thru 2012, according to • From 2007 thru 2012, according to • The total number of hospital • The total number of hospital the Foundation for American the Foundation for American merger and acquisition merger and acquisition Hospitals, there were: Hospitals, there were: transactions from 2003-2012, transactions from 2003-2012, • 432 mergers and acquisitions, • 432 mergers and acquisitions, according to The Health Care M&A according to The Health Care M&A • Involving 835 hospitals • Involving 835 hospitals Report Report 1

% of Hospitals in Systems % of Hospitals in Systems 52 % 52 % 2000: 2000: 61 % 61 % 2012: 2012: Source: AHA Hospital Statistics Source: AHA Hospital Statistics -- New York Times, Sept. 17, 2014 “Lots of hospitals are looking across the “Lots of hospitals are looking across the Mergers Carry Major Risks Mergers Carry Major Risks street at other hospitals merging. They also street at other hospitals merging. They also feel like they have to merge too, or else feel like they have to merge too, or else • The industry is littered with deals • The industry is littered with deals they’ll become insignificant or left out of they’ll become insignificant or left out of gone bad gone bad health plan networks. Especially the smaller health plan networks. Especially the smaller community hospitals feel they need larger community hospitals feel they need larger • Two-thirds of deals do not meet • Two-thirds of deals do not meet scale to continue to be stable, to serve, or scale to continue to be stable, to serve, or expectations, according to a 2012 expectations, according to a 2012 be financially viable.” be financially viable.” report from PricewaterhouseCoopers report from PricewaterhouseCoopers -- Alexis James Gilman, deputy assistant director, Mergers Division, Federal Trade Commission Why? Why? _________________________ _________________________ • Inadequate due diligence • Inadequate due diligence • Culture clashes • Culture clashes Alternatives? Alternatives? • Overpaying • Overpaying _________________________ _________________________ • Excessive debt • Excessive debt • Loss of key employees • Loss of key employees • Extended integration period • Extended integration period 2

Affiliations Affiliations “Hospital Alliances On the Rise.” “Hospital Alliances On the Rise.” Alliances Alliances • They build population health • They build population health Coalitions Coalitions management capabilities management capabilities • Maintain the independence of members • Maintain the independence of members Collaborations Collaborations • Provide vehicles for increasing • Provide vehicles for increasing JVs JVs physician engagement physician engagement Partnerships Partnerships and… and… Independence Independence A Regional Alliance (Sept. 2013) Founding Initiatives Founding Initiatives www.AllSpireHealthPartners.org  Group purchasing/sourcing and  Group purchasing/sourcing and distribution distribution  Population health management  Population health management  Sharing best clinical practices  Sharing best clinical practices  Information technology  Information technology “ ” “ ” • “Our systems serve contiguous areas, yet • “Our systems serve contiguous areas, yet operate in distinct markets. We see this operate in distinct markets. We see this as an opportunity to protect and as an opportunity to protect and strengthen what we’ve each always done, strengthen what we’ve each always done, while positioning ourselves to thrive in while positioning ourselves to thrive in the future as a network of locally- the future as a network of locally- governed organizations.” governed organizations.” Florida Times-Union , Jacksonville, FL 3

“Some of the biggest names in “Some of the biggest names in PA Mountain Care Netw ork PA Mountain Care Netw ork health care delivery are putting health care delivery are putting their brand names on systems far their brand names on systems far • 3 small hospitals: Clarion Hospital, Indiana • 3 small hospitals: Clarion Hospital, Indiana Regional, Punxsutawney Area Hospital Regional, Punxsutawney Area Hospital afield from their main campuses.” afield from their main campuses.” • Combined: 2,200 employees; 200 doctors; • Combined: 2,200 employees; 200 doctors; $220 million net patient revenue $220 million net patient revenue • Will keep individual identities and operate • Will keep individual identities and operate under shared corporate umbrella under shared corporate umbrella February 25, 2013 • Will collaborate on cost reductions and • Will collaborate on cost reductions and service improvements service improvements 9 members in its “Physician Network,” started in 2005. 23 affiliates with its heart, neuroscience, neurosurgery, transplant, TeleStroke and oncology service lines, according to news reports. 4

5