Doug Swill was quoted in Modern Healthcare for a story that analyzed a broad trend among health systems seeking joint ventures and partnerships. Swill provided insight about how such partnerships carry many of the same benefits of a merger or acquisition, but require less capital and carry less risk.
Swill told the publication that in some cases, a health system wants to buy a hospital from another system, but the price is too high. “The health system says, ‘We want you, but we’re not going to put in a premium right now,’” he said. “So they do a JV and the health system buys a percentage of that hospital.”
In this example, the health system—often a not-for-profit—will buy less than 50% of the hospital so that the seller retains ownership control. In some cases, the buyer provides a capital commitment to the target system in exchange for board seats, Modern Healthcare reports.
According to Swill, these deals would need to undergo antitrust analyses, especially if the providers are in the same market.
Those partnerships also make sense when the seller has attributes, like a strong ambulatory outreach strategy or electronic health record system that would benefit the buyer. It’s a common scenario when a large health system has a pricey EHR system, and a smaller hospital can’t afford the system but needs to improve its medical records system. In such a case, the smaller hospital would contract with the larger one, which would then serve as an EHR host.
“We’re definitely seeing an uptick in that,” Swill said.