Size should matter: Five ways to help healthcare systems realize the benefits of scale

The U.S. healthcare industry is experiencing a tsunami of change. As reimbursement rates decline for both public and private payors, hospitals and healthcare systems face declining revenue, pressuring them to reduce costs by 20 to 25 percent in the short term.

In this environment, mergers, partnerships, and strategic alliances are becoming more popular as healthcare systems realign themselves to establish the right set of clinical specialties, referral networks, and geographic coverage. Institutions that cannot compete become attractive M&A candidates. And many faith-based healthcare systems are seeking new corporate arrangements to become more viable healthcare system partners. By Strategy& estimates, roughly 1,000 hospitals — or one in five across the U.S. market — will be realigned during the next decade.

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