Mergers and Acquisitions In Health Care Industry

Mergers and acquisitions are gaining popularity as the health care industry continues to determine how to best provide services to a wide variety of patients.

Why Health Care Organizations Merge

Healthcare organizations merge for a number of reasons. One of these reasons is to enhance efficiency by recognizing economies of scale for instance by reallocating resources from different locations in reaction to excess capacity or any other changing situation. This is also achieved by lowering administrative and management overhead, confining care in a smaller volume of locations, increasing treatments volume in locations and sharing expertise.

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Mergers also represent strategic trials by organizations to obtain market power. Merger normally results to a greater provider market share especially when the merger is between competitors, and as a result, strengthening the market position of the newly established company after the merger. This gives such healthcare organization an opportunity to determine prices in the market (Postma & Roos, 2015).

How Stakeholders Benefits

Stakeholders in healthcare mergers include physicians and other medical workers, insurance companies, healthcare managements, investors, workers, patients and sometimes the board members. The main advantage of mergers for the patients is the enhanced efficiency which resulted to higher quality of care. To the workers, mergers may result to interacting with new workers from the other company gaining new ideas and new problems approach during operation. Increase in efficiency also benefits managers and investors of the healthcare organization since it end up reducing the operation cost, which eventually results to higher profits. Insurance companies also benefits by higher operation efficiency since it reduce its liability caused by medical errors and other medically preventable complication. Thus, successful healthcare mergers provide great advantage to all involved stakeholders (Roberts, Wallace & Moles, 2 015).

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