Mergers, Acquisition and Other Types of Multi-Entity

¶ … Mergers, acquisition and other types of multi-entity deals have been common instruments in the economy to increase market share, gain new businesses and customers, expand the business and become more competitive. More and more in the last years, this practice has been common in the health industry, with hospitals attempting to achieve similar objectives through mergers and multi-hospital deals. An issue in their case, however, is that the health sector has its own particularities that may have an impact on whether market share can actually be gained with such means or whether internal and external factors create sufficient pressures to impede the process of increasing market share.

Adamopoulos (2013) argues that consolidation in the health sector (through mergers and acquisitions) is the only way that hospitals are going to be able to face an increasingly challenging environment that includes rising costs and new medical problems. This seems a coherent and reasonable idea: by merging, two medical facilities can put together resources and, through the creation of a bigger entity, can reduce costs by creating economies of scale.

At the same time, mergers can ensure access to new markets. In the example that Adamopoulos discusses, the two hospitals were operating, before the merger, in ten states and five states respectively. By joining forces, the new medical facility would now be present in 15 states across the U.S., with numerous new perspectives.

So, putting all these elements together, it does seem that hospital mergers are a way to increase market share by enabling access on new markets, both in the U.S. And abroad, with potential gains for the entities involved. Mergers could come as a response to some of the challenges that are mentioned (economic problems, pharmaceuticals etc.) by allowing the new entities to become more competitive, create economies of scale and put resources together. The positive effects appear to be more in this area rather than simply to create market share.

The U.S. has already embarked on a process of changing the health care system. As Wolfe (n.a.) pointed out, there are two primary problems that have triggered this process: increasing medical costs and the large proportion of the population that is not covered by any form of medical insurance. So, the change in the U.S. health care system should target both of these pending issues.