Testing the water

For the past several decades mergers have been an attractive option for systems looking to diversify and for small hospitals trying to find a way to survive. Before entering into a merger agreement, each of the parties involved should carefully assess whether the move is in its best interests. Chief executive officers of small hospitals should determine whether a merger will improve their facility's ability to provide needed programs and services to their community. They should also evaluate their and their partner's current fiscal status to assess whether the timing is right for a merger. Another important consideration is whether or to what extent the new governance structure will provide each partner with appropriate representation. For healthcare systems looking to acquire a smaller hospital, two key concerns are whether the facility is in a favorable location to gain increased market penetration and whether resources are, or can be made, available to consummate the merger. Systems should also ask if the smaller hospital will at least be a break-even operation and if political opposition might undermine a merger attempt. Finally, although merger proposals are likely to disturb some members of the community they affect, a well-planned and credibly negotiated merger is usually in the region's best interests.