A profile of U.S. hospital mergers

According to Modern Healthcare's Annual Report on Mergers and Acquisitions the number of hospital mergers has declined significantly since the Balanced Budget Act of 1997. This study evaluated market characteristics, organizational factors and the operational performance of these hospitals prior to merger. We found that merged hospitals were more likely to be located in markets with higher per capital income and higher HMO penetration. Merged hospitals were larger in size and had greater clinical complexity as measured by increased services. Finally, we found that merged hospitals had higher occupancy rates, lower return on assets (ROA), and older facilities. From a managerial perspective, merged hospitals display many of the characteristics of an organization in financial distress. From a policy standpoint, the decline in hospital mergers subsequent to the Balanced Budget Act of 1997 may affect the long-term survivability of many U.S. hospitals.