Nontraditional Partnerships in M&A
Manage Resource Group continues to see a spike in activity associated with I&A services and has noticed that hospitals and providers are looking at nontraditional partnerships within M&A activity.
Mergers and acquisitions between health care providers have more than doubled in the last ten years, with a particular rise in nontraditional partnership transactions, such as:
- Joint venture agreements
- Minority investments
- Clinical affiliations
- Timeshare agreements
Traditional partnerships were driven by the needs of smaller organizations and physician practices, where they could improve clinical programs and services by merging with a larger health system. The move to nontraditional partnerships stems from long-term care strategies and value-based care across all organizations, with health systems leading the way in expanding their reach to patients and implementing these ideals across facilities.
Changes in healthcare partnership are also facilitated by changes in health services legislation, especially in terms of leasing arrangements for healthcare providers. Stark Law required that physicians enter a formal lease providing exclusive use of their premises and equipment to the lessor, usually a hospital or physician group. These leases had a one year minimum and prohibited the physician and lessor from sharing space and equipment during the term. This led to inefficient, inflexible, and impractical arrangements for all parties involved.
In 2016 the Center for Medicare and Medicaid Services added a Timeshare Arrangements exception to Stark Law, permitting the sharing of space, equipment, supplies, and services on non-exclusive leasing terms between healthcare providers. As an alternative to a full-time lease, timesharing makes it easier for physicians and hospitals to share resources on an as-needed basis and expand available services for patients without transferring ownership of properties.
Hospitals and health systems will continue to make strategic alignments with providers along the continuum of care allowing for creative teamwork within the industry. Such partnerships result in the centralization of essential functions such as IT, purchasing, and human resources for larger organizations, while increasing resource availability and data collection power to small physician practices.
In a continually consolidating healthcare environment, traditional mergers and nontraditional counterparts should all be considered and weighed to determine the best route of action to fit the needs of physicians, hospitals, and patients.
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