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Behind the healthcare merger mania

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What’s with the healthcare merger frenzy?

This New York Times review of the frenzy cites low interest rates, cheap capital and the “l0nger-term need to restructure” to address changes in the sector caused by the Affordable Care Act.

The article asserts that healthcare is now “devoted to the mantra that bigger is always better.”

Well, not everyone in the sector would agree.

What is clear is that the sector is more fragmented than many others. Thus there’s more to be gained  financially by consolidation.

“All of the parties are under intense pressure to reduce costs, and consolidation is seen as necessary to do so, especially among smaller entities like hospitals. ‘There is serious economy of scale to be accomplished,  Kaveh Safavi, M.D., the managing director for Accenture’s global health practice, told The Times.

“Hospitals are also supersizing so they can invest more in technology and computer systems that allow them to better track patients’ care.”

A big question, of course, is whether regulators will push back on many of these proposed mergers.

In any event, the merger mania  will probably continue for some years to come.







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