How to Capitalize on the Cost Benefits of Economies of Scale (104H)

In 2023, hospital M&A activity reached its highest level since 2020, with average seller size steadily increasing. While early phases of M&A prioritize growing market share and increasing revenue, as organizations advance in scale, they must shift focus to integrating and capitalizing on cost-saving opportunities. Many healthcare organizations are challenged by this change in mindset and, as a result, fail to fully optimize the benefits of integration. Concurrently, as scaling has advanced, there has been increasing pushback from regulators challenging large-scale healthcare transactions.

In May 2024, the U.S. Justice Department announced that it has developed a new task force to review and address antitrust concerns spanning "issues regarding payer-provider consolidation, serial acquisitions, labor and quality of care, medical billing, healthcare IT services, and access to and misuse of health care data." For this and many other reasons, not all healthcare organizations will join mega-systems—but we believe all providers can learn and benefit from the rationale behind these mergers and optimize their cost structures to reduce overall healthcare expenditures. This session will discuss the reasons organizations struggle to shift from a growth-mindset to a scale-mindset in order to realize scalable cost-savings; how organizations can change their approach to effectively pursue the goals of cost reduction through scaling, even if they are not part of a larger integration plan; and practical tools and approaches to achieving the benefits of economies of scale, regardless of an organization's size.