Booz: Acquired hospitals book poorer financial results

26 March 2013 Consultancy.uk 1 min. read

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.

Booz - Overgenomen Ziekenhuizen

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.

Booz - Ziekenhuis M&A

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.