Thinking about merging your health center with another? It could be the key to sustainability and growth in today's ever-changing healthcare landscape. With razor-thin margins and fast-evolving technology, many health centers are finding that mergers are not just an option—they're a strategy for the future.
👉Even before the pandemic, community health centers faced razor-thin margins, complex regulations, and the rapid evolution of healthcare technology.
Over the years, I've seen an upward trend in health centers merging or one health center acquiring nearby smaller health centers. This is either out of necessity or part of a strategy to expand access to high-quality healthcare in rural parts of the country.
Five things to consider if you're thinking of or planning a merger with another health center:
1️⃣ Merging can reduce costs: Research shows FQHC mergers reduce costs by 3.3% per visit. Increasing the number of patients served and services delivered decreases the average service cost because of scale economies. It also reduces administrative and operating expenses.
2️⃣ Expanding into different markets: Community health centers serve regions all over the US and the US territories. They're located in urban and rural areas, and each health center typically has more than one site. Merging health centers makes it easier to add sites and collectively serve more patients.
3️⃣ Leveraging technology and innovation: Technology is expensive and has a short shelf life. However, health centers depend on up-to-date, state-of-the-art technology to serve patients efficiently and effectively. When health centers merge, they have the buying power to purchase technology in bulk and at better prices.
✅Bonus tip: use your non-profit status for even deeper discounts
4️⃣ Negotiating better rates with payers: When merging, You serve more people. Payers will be willing to negotiate better rates with you when you're taking care of many of their members.
5️⃣ Larger scope of service equals higher PPS rate: When you add complexity and more services to your scope of service, you can apply for a higher PPS rate. A higher PPS rate allows your health center to see more Medicaid patients and increases access to underserved populations.
Consider these five benefits if you're contemplating a merger or acquisition of your federally qualified health center. Expanding access, having a healthier margin, and being sustainable over the long term might be viable business strategies.
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