Member Article

Strategic partnerships between investor-owned companies and nonprofit hospitals or health systems are an unmistakable trend in the health care industry today. Such strategic partnerships can consist of a myriad of structures and variations thereof. The most common transaction structures include affiliations, management arrangements, joint operating arrangements, joint ventures, asset leases, and asset sales/acquisitions. Each transaction structure serves to fulfill the varying goals and objectives of the strategic partners involved in such relationships. As an investor-owned company evaluates the various transaction structures for the best fit in a strategic relationship with a nonprofit hospital or health system, there are a host of critical factors to consider. This article identifies and describes the top ten key considerations in a transaction structure evaluation and selection process.

1. Level of Integration Desired

Transaction structures offer varying levels of potential integration in all aspects of the strategic relationship, including operational integration, clinical integration, financial integration, and cultural integration. The strategic partners may mutually agree upon the level of integration that is desired among the parties and their hospital facilities. Complete integration is not always the goal for both parties, as one party may desire to retain separate systems of operation, identity, or culture. For example, a Catholic health system may desire to retain its Catholic values and characteristics, while its strategic partner may have little interest in injecting such values and characteristics into the culture and operation of its corporate office or its facilities; however, for practical purposes, any facility that is at least partly owned by the Catholic health system following the transaction will retain its Catholic values and characteristics.

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