Pros & Cons of Mergers & Acquisitions
Review the following scenario:
You are the chief executive officer (CEO) of a 200-bed nonprofit community hospital that serves a rural community with a population of 50, 000. The demographics include a median household income of $38,000. Currently, slightly less than half of the population (45%) has employer-sponsored insurance, with 35% having a combination of Medicare and private supplemental insurance and the remaining 20% being uninsured. The population is aging, with 40% of the population expected to reach Medicare eligibility age within the next 5 years, where employer-sponsored insurance will shift to Medicare or a combination of Medicare and other supplemental insurance.
A group of internal medicine physicians specializing in geriatric medicine, including joint replacement surgeries, is looking to expand their services. The physician group has approached the hospital about merging their services with the hospital and expanding the hospital to include an ambulatory care center and outpatient surgical center.
Based on your analysis of the scenario, explain the potential risks and benefits of the merger. Be sure to address the following:
What, if any, opportunities are there for cost control if the decision to merge with the physician group is made by the hospital?
What are some of the changes in Medicare reimbursement that could affect the long-term success of the merger?
Would the community hospital be better served by countering the physician group’s offer to merge with the hospital or would acquiring the physician group better serve the hospital’s interests?
Describe any ethical considerations that could influence the CEO’s decision.
Write a 3–5-page paper in Word format. Utilize 2–3 scholarly sources in your research. Your paper should be clear, concise, and organized; demonstrate ethical scholarship in accurate representation and attribution of sources; and display accurate spelling, grammar, and punctuation. Apply APA standards to citation of sources.
Solution Preview
The physician group of internal medicine could either be a blessing in disguise or such a massive risk for the community hospital. If the community hospital agrees to merge with the physician group, the hospital’s financial statements must be shared between the hospital management as well as the physician group. Both of the two groups are allowed to have a personal financial advisor who will monitor the amount of money that will be spent or instead invested in obtaining the hospital’s equipment, and the various services that are to be offered to the people (Jacqueline, 2017). The physician group will be the ones who will have the most say when it comes to making financial decisions; therefore, this means that they will be ones with the highest opportunities in terms of cost control.
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