A Strategic & Quantifiable Approach to Identifying a Rural & Community Hospital’s Options
At some point in the life of a healthcare enterprise, consideration may be given to the strategic value of a partnership or affiliation with another institution or group, acquisition of another hospital, or evaluation of how to improve the contribution margin of existing affiliates.
If the prospective or existing affiliate is a rural hospital, more times than not, the true value of the partnership opportunity has not been fully and accurately evaluated. This is because rural hospitals have unique value levers that often are overlooked or discounted by larger systems. These value levers include:
- Cost-based payment
- Cost report optimization opportunities
- Home office cost allocation
- Access to 340B, including post Genesis ruling opportunities
- Swing beds
- Rural health clinics (RHCs)
- The “true” contribution margin of clinically necessary incremental referrals
- Incremental primary care referral base and “covered lives”
Stroudwater combines the experience from advising on more than 100 rural and community hospital partnerships alongside industry leading rural hospital operational and financial expertise. Our unique value proposition unlocks the often hidden value proposition of rural hospitals. We have the proven expertise to implement changes and programs to realize the promise of the rural value proposition.
Communicating the Rural Value to Prospective Partners
For any Rural and Community Hospital or health system evaluating its affiliation options, it is critical to ensure that prospective partners understand the unique attributes and value that they can bring as an affiliate to prospective partners. In our experience as a national and rural healthcare advisory practice, we have seen prospective partners fail to understand the value drivers of rural provider organizations to a larger health system.
Download White PaperOur Approach
Our approach to each partnerships and affiliation engagement is based on developing a clear definition of our client’s strategic objectives and the constraints that the parties bring to the potential partnership. These client inputs are matched with our insights on the often missed or misunderstood value opportunities provided by a rural affiliate. The constraints, objectives and analysis of the value of a rural affiliate guide our approach to crafting a durable partnership that will provide long term value and community benefit. We will then manage the affiliation or transaction process from initial discussions to closing, including business planning for sharpening post-closing initiatives.
An important point of differentiation of our approach is that we are not transaction focused, but rather focused on the optimal approach for achieving our clients’ strategic goals. Affiliation discussions may not lead to a final deal. As the details of the transaction are negotiated, there may be valid strategic reasons to terminate discussions or change affiliation partners. Throughout the affiliation process, the strategic objectives of the organization should determine whether the affiliation is in the best interest of the institution.
Rural Healthcare Partnerships & Affiliations Experts
We Pride Ourselves On:
Experience in identifying and evaluating the strategic options available to the rural healthcare institution, which serves as the underlying context for most transactions
Experience in facilitating partnerships, acquisition, affiliation, and divestiture discussions resulting in relationship structures providing benefit to both organizations and the markets they serve
Objectivity identifying relationship structures that meet the respective needs of both organizations and have the ability to achieve meaningful results
Collaboration with legal counsel and other expert resources to assure the overall process is comprehensive, timely, and issues are appropriately identified and processed.
