Around the nation in recent years there has been a rash of mergers of healthcare organizations hoping that additional scale will help them realize efficiencies and lower costs.
"System integration is viewed as a central strategy for improving clinical outcomes, market growth and financial performance while mitigating the effects of increasing labor costs and inflation," noted a summary of a CBRE Healthcare Forum on the topic of mergers.
The problem is clear. Operating margins in March 2023 fell 27% compared to the same period in 2020. Healthcare systems are facing rising labor costs because of labor shortages, which are also driving declining clinical volumes. The shift to outpatient procedures from inpatient care is another complication. These and other factors "require significant structural improvements that result in sustainable and systemic solutions," CBRE stated.
Recommended For You
To achieve this goal, Intermountain Healthcare Regional in Colorado, formed by the merger of SCL Health and Intermountain Healthcare, adopted a single operating model. And it adopted a standardized footprint for its primary care medical group in their Colorado and Montana markets. Every primary care facility is developed with the same square footage and layout that enables faster service and creates an efficient workflow, CBRE noted.
For a healthcare merger to succeed, the organizations involved need to integrate a host of clinical, operational, procedural, financial and labor models. They may also need to rethink the way real estate is managed. "Health system integration brings significant value in both cost and growth synergies with a direct impact on the delivery of corporate real estate, facilities management and project management services," CBRE stated.
However, CBRE found that building management, engineering and construction project management were among the least integrated functions within the health system's administrative services post-merger. And real estate was only slightly more centralized.
"The breakdown of CRE/FM/PM suggests that activities that involve setting strategic direction or selecting systemwide third-party partners are more centralized, while the tactical delivery of services at a specific site are more decentralized," CBRE concluded. "The journey toward effective integration [of these functions] may appear overwhelming, however, a well-built plan paired with the support of experienced integration partners will serve as the foundation for a successful integration."
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
