Booz: Acquired hospitals book poorer financial results

In most cases hospitals that have been acquired book poorer financial results than their peers. At least, that is the case in the USA according to Booz & Company. Booz & Company based their findigns on an analysis of 219 mergers and acquisitions in the hospital sector between 1998 and 2008.

The consultants of the strategic consulting firm analysed the operating income and margins of hospitals during a five year period - two years before, one year during, and two years after the transaction. The report found that most deals have failed to live up to financial expectations. Only 41% of acquired hospitals outperformed their market peer group - hospitals that share the same ownership type, facility size, regional location and tax status. Even more striking is that one in five acquired hospitals (18%) actually went from having positive margins before a deal to negative margins two years after the deal.

M & A in the hospital sector fundamentally different

In the report 'Succeeding in Hospital & Health Systems M&A' Booz & Company comes to another interesting conclusion. Its analysis reveals that the drivers of  M&A in the hospital sector is fundamentally different from those in other industries. For example, standard market-related variables - such as similar tax status, geographic proximity, market concentration - have no detectable impact on the success of a transaction. In other sectors, this is largely the case. Also operating variables for a deal in the hospital sector - such as the number of beds, occupancy rates, and length of stay - have no apparent relation with financial performance.