In an interview with Chief Healthcare Executive®, he talks about why there could be more deals, and why he thinks more health systems should be coming together.
Kevin Samuelson has seen the recent uptick in hospital mergers, and he expects to see more consolidation in the future.
Samuelson is the CEO of Infor, a tech company that works with health systems in improving operations, supply chain management, and reducing administrative burdens. Infor also works with hospitals in mergers and acquisitions to help them bring their systems together.
In an interview with Chief Healthcare Executive®, Samuelson says financial pressures are going to drive more health systems to look at mergers or partnerships.
“Absolutely, I think it will continue,” Samuelson says.
Samuelson also suggests that more hospitals and health systems should come together to offer expanded services for patients.
“I think it's important, frankly, that there's more consolidation because I think there has to be, and the longer it takes to get there, unless things dramatically change economically, I think the more detriment to all of our communities,” he says.
Greater economic challenges
More hospitals and health systems have announced mergers this year, and analysts expect to see more deals taking place next year.
More deals were announced in the third quarter than in the previous two years, according to Kaufman Hall, a consulting firm. Through the first three quarters of 2023, there have been 53 announced hospital mergers, according to data from Kaufman Hall. That already equals the 53 hospital mergers reported in all of 2022.
Healthcare mergers have plenty of critics, with opponents saying they lead to higher costs and reduced services. Lawmakers in Congress, Democrats and Republicans alike, have expressed concerns about the growing consolidation in healthcare. The Federal Trade Commission has applied more scrutiny to hospital deals and opposed some recent transactions, saying they’d reduce competition.
Samuelson says more systems are going to seek partners to offer better services to patients, or simply to keep their doors open. It’s becoming more difficult for local hospitals and systems, he suggests.
“The challenges around the economics of running a hospital now are so significant,” he says.
He also sees a growing divide between “haves” and “have nots” with health systems in terms of technology, including telehealth capabilities and artificial intelligence.
“I think that could also drive some further division, and that could also accelerate M&A,” he says.
‘People and culture’
Infor has partnered with CHRISTUS Health, Kaleida Health and other systems, and Samuelson says he’s witnessed a number of deals from the inside. He suggests some common traits that are seen in more successful mergers.
Hospitals systems have an easier time coming together when there’s less overlap of capabilities and geographies, he says.
Samuelson says it’s critical for hospitals to be culturally aligned to improve their chances of being successful with a merger.
“Having spent a lot of time in a lot of healthcare systems, culture is going to drive the outcome much more than anything else,” Samuelson says. “And they're very, very different ways that folks think about running and operating hospitals.”
“People and culture trump everything, and ensuring there's a fit there is really important,” he says.
Samuelson also says it’s vital for hospitals to be able to successfully integrate systems and people in order to gain more efficiencies and insights. He says health systems that are consolidating should begin that work early in the merger process.
“It's that integration work and those tough decisions that flush out where there actually is risk, and I would say waiting too long on that front will result probably in a bunch of surprises in the back end that aren't good,” he says.
Speaking generally and not about any specific deals, Samuelson says organizations that are facing increasing financial difficulty should consider finding partners before they find themselves in a precarious situation.
“Where there's significant financial issues, there just isn't an ability to be as discerning with how things end up, which is challenging,” Samuelson says.
Some struggling health systems end up waiting too long to pursue a merger, and by the time they act, they have less time to move thoughtfully.
“I think this is true across many industries,” Samuelson says. “The notion of relinquishing control, or being viewed as, ‘We didn’t make it work,’ results in people hanging on largely way, way too long. And the issue obviously is, especially when it's related to economics, you really begin to lose your ability to drive a good outcome to find the right partner. And a lot of value’s destroyed.”
Adapt and innovate
With more non-traditional rivals such as retailers looking to play a bigger role in healthcare, hospitals and health systems need to be willing to adapt, Samuelson says.
“There's a ton of change and disruption,” he says. “And there are some hospitals that recognize that's the way to go and are building strategies to embrace that and a lot of others that are really kicking and screaming trying to stop that. And again, this isn't just healthcare. You see this in many, many industries. And I think that's going to separate those that end up in a good place versus those that, frankly, are not.”
Health systems must recognize that consumers are looking to have an easier time getting care and navigating the whole system, from scheduling appointments to paying bills.
Consumers are seeking affordable access with as little friction as possible in their healthcare experience, Samuelson says.
“I think we all know that it's a challenge in the current environment, but getting to something like that's hugely beneficial,” he says. “So I think those hospitals that recognize that, embrace it and innovate will do great. But I don't think that's going to be everywhere, because there are a lot of folks still resistant.”