Tag Archives: M&A
Seven healthcare industry trends to watch
In Battle Of Health Care Titans, Should Insurers Act Like Wal-Mart?
In late July, the Justice Department sued to block both insurance mergers, arguing that competition is important to keep premiums down and that the deals “would leave much of the multitrillion-dollar health insurance industry in the hands of three mammoth insurance companies.”
They also rejected the Wal-Mart argument, which is related to what economists call “monopsony,” a concentration of buying power.
Monopsony is the opposite of monopoly: Instead of using market dominance to raise prices for consumers, huge buyers force down prices from suppliers. Wal-Mart is often described as holding monopsony-like power.
But critics of the insurance deals say monopsony can go too far. If the buyer pushes prices too low, suppliers stop producing, making needed goods and services unavailable.
“As a result of the merger, Anthem likely would reduce the rates that … providers earn by providing medical care to their patients,” the Justice Department argued. “This reduction in reimbursement rates likely would lead to a reduction in consumers’ access to medical care.”
When is it time to bring in a consultant?
http://www.healthcaredive.com/news/when-is-it-time-to-bring-in-a-consultant/424031/
There are several good reasons to hire consultants. One is a lack of internal resources. That could be due to management vacancies, or the proposed project could be temporary in nature and hospital officials don’t want to divert existing staff or hire more full-time employees to get it done.
Still another reason is to get a gut check on decisions that are of vital importance to the organization, like planning an acquisition or a major capital expansion.
In other cases, hospitals may have expertise, but bringing in a third party — say, to assess a vendor selection process — can lend independence and objectivity to the solution, resulting in more confidence in the final decision, says Brad Armstrong, senior partner at T2C.
Hospitals turn to consultants during mergers and acquisitions, not only to advise the logistics of deal itself but also on operational changes — figuring out how to bring two entities together in a way is more efficient and functional. Consultants can also bring needed expertise to issues like staff productivity and operational efficiencies.
Consolidation in healthcare continues, but nontraditional alliances are also on the rise
“The continuing uptick in mergers and acquisitions is not surprising,” says Anu Singh, managing director at Kaufman Hall. “The industry is rapidly changing and many organizations are not optimally positioned to navigate the transition to value-based care on their own. Healthcare leaders should thoroughly evaluate the partnership options to help ensure strong, competitive positioning for their organizations into the future.”
Judge: Only time for one insurer merger case in 2016
A federal judge said Thursday it is unlikely he would be able to rule on both the Aetna-Humana and Anthem-Cigna antitrust suits by the end of the year, according to Reuters.
Lawyers from Anthem and Aetna argued this week that Judge John Bates should hear their cases before the end of 2016. The Justice Department filed suits in July against both mergers, citing competition concerns that it says would increase prices for consumers and stunt innovation.
Bates said in a hearing Thursday that both requests cannot be fulfilled, but did not say which case would be sent for reassignment.
“That’s my determination: that I can’t do both,” Bates said in the hearing, according to Reuters.
Aetna believes it has a simpler case, the article adds. Further, its deal with Humana was announced first.
Anthem’s lawyers, though, point out that if the case is not settled by the end of the year, Cigna will likely refuse to extend their agreement, thus dooming the merger, Reuters notes.
In an interview with FierceHealthPayer, antitrust lawyer David Balto indicated that the Anthem-Cigna merger is “like climbing Mount Everest,” and that they are less poised to battle the DOJ than Aetna and Humana.
Hospital Chain’s CEO Faces Lawsuit Over Business Practices
http://www.wsj.com/articles/hospital-chains-ceo-faces-lawsuit-over-business-practices-1470021573
Prem Reddy, head of Prime Healthcare, is known for his aggressive turnaround strategies.
MERGER IN THE WIND? 5 Important Career Management Reminders
For potential suitors in the healthcare mergers craze that seems to reflect the idea that bigger is better, or at least safer, the important question at hand is how long will it take to turn around a 1,093-foot nuclear-powdered aircraft carrier in the Houston ship channel that is 45 feet deep and only 500 feet wide?
Meanwhile there are consultants, investment bankers and lawyers standing on the sidelines, much as they did during the 1990s merger phase, ready to reap big fees to unwind or litigate a difficult divorce before the creditors call the question.
For executives who must also worry about their own career path, the potential for layoffs in mergers is no laughing matter. As one CEO said of his merger with another regional system, “There are going to be a lot of people who lose their jobs through no fault of their own.”
If you are employed by an organization in serious merger talks, or waiting for the FTC or the courts to bless the consolidation, what should you do?
HENRY KOTULA 