Companies joining together are commonplace in today’s business world, and in some cases may make business sense. Typically, this is done through the merger and acquisition process, which can entail many legal complexities and regulatory issues. However, our readers may find it interesting to learn that Lafayette General Health has decided to join the Ochsner Health Network, and what is unique about this particular instance of two health organizations working together is that there is no official merger or acquisition taking place. Instead of a hostile acquisition of one company by another, the two companies have come to a mutual agreement to join forces in a long-term corporate strategy involving partnership.
The driving force behind the newly-formed partnership is a desire by both firms to bring down operating costs. Joining forces will allow the business partners to pool together their buying power and allow them to reduce the cost of purchasing specialty items such as implants and prosthetics. Health systems have been experiencing a paradigm shift ever since the Affordable Care Act was passed. Today’s healthcare system is evolving into one that rewards health providers for maintaining their patients’ health rather than dispensing a certain number or amount of treatments.
One of the benefits that the health providers reap from entering into mutual partnerships rather than launching an acquisition bid is that there may be fewer struggles over who vies for control. In addition, companies do not have to contend with assimilation issues of one company absorbing the other. Not all organizations need new management; sometimes what they need is the right partner.
According to the CEO of Ochsner Health System, this is just the first stepping stone in a multistage plan that will include even more partnerships and eventually a statewide network of health care facilities. Once that goal has been reached, one of the next business goals will be to expand out of the state and establish a multi-state network.
Source: The Advocate, “Lafayette General Health partnering with Ochsner network,” Ted Griggs, May 1, 2015