Jan. 25 — In 2012, healthcare reform and changing payment methodologies drove the highest consolidation activity among U.S. not-for-profit hospitals since 2000, according to a new Fitch Ratings survey.

Expected payment reductions and changing payment methodologies forced not-for-profit hospitals in 2012 to operate more efficiently and improve coordination across the care continuum, the survey said. Survey data also revealed that providers are increasingly exploring new consolidation and alignment strategies with other hospitals, physicians, and insurers.

Traditional factors such as economies of scale, access to capital, and market share continued to play a role in hospital consolidation, but not as strongly as strategic preparation for healthcare reform, according to the survey.

Implementing new strategies, which could potentially have positive effects for hospitals, also introduces execution risk, Fitch noted. Strategic partnerships and incremental adoption of new operating models are designed to mitigate some of that risk. Given the capital resources and managerial expertise that new alignment strategies require, the global ratings agency expects the credit-metrics gap between lower- and higher-rated hospitals to continue to widen.  

Publication Date: Friday, January 25, 2013