Strategic Alliances – Home Health and Hospice Mergers & Acquisitions
December 6, 2015
A significant industry trend picking up steam in the wake of healthcare reform is consolidation of healthcare businesses and facilities to create larger healthcare systems with a broader scope of services. By merging, acquiring or forming strategic alliances, hospitals and other large health care companies can service larger populations and leverage economies of scale to offset the increasing economic and regulatory pressures.
More hospitals and healthcare facilities are joining with providers of ancillary services to reduce costs and better serve their patients. Health care executives see opportunities in the current market to join with home health and hospice companies to offer a full continuum of care to their patients.
Scripps Health entered the Hospice market through the acquisition of Horizon Hospice when San Diego Hospice filed for bankruptcy. According to Chris Van Gorder, President and CEO of Scripps Health, Scripps was concerned about the potential total collapse of hospice during a bankruptcy and the fact that many of Scripps patients’ care could be impacted, Scripps made a decision to enter the Hospice business. Van Gorder stated that healthcare in the future must become more integrated and providers like Scripps must either provide the care or collaborate more closely to provide the entire continuum of care.
Scripps isn’t the only hospital forming alliances or acquiring home health and hospice. Hospitals are increasingly joining forces with home health and hospice as a way to coordinate care of patients through an integrated system.
SCL Health in Denver decided to create a home health joint venture because of a desire to extend services to patients beyond what the hospital had been able to provide. They partnered with Univita and now SCL Health extends care to the home, working together with clinicians and families to improve the outcomes of the patients they serve. As hospitals seek to lower costs, reduce readmissions and improve the patient experience, relationships with seasoned providers are particularly important.
Home health and hospice providers can realize a number of benefits through formal relationships with hospitals or other health facilities. A recent joint venture took place between Tidelands Community Hospice and Georgetown Hospital system in South Carolina. The joint venture will result in cost savings to both the hospital and the hospice. The hospital will be more proactive in the care of their patients and the Hospice operation will benefit from reduced costs including lower drug costs.
The joint venture arrangement allows both entities to maintain their original identity, mission and goals while collaborating on the care of Hospice patients. Both companies remain fully intact while the joint venture is created as a separate entity employing those people who work directly for the joint venture. The joint venture is put in place for a specific purpose, in this case, to strengthen and formalize the relationship between the hospital and the hospice and leverage on each other’s strengths.
Affiliations, Joint Ventures, Mergers and Acquisitions are some of the more common types of strategic alliances.
The most common reasons for facilities to enter into some form of strategic alliance is to leverage the clinical and managerial strengths of each entity, reduce costs through economies of scale and purchasing power, and to gain geographic strength to better serve patient and community.