As it stares down a rapidly consolidating industry, falling reimbursements and a declining population in its home base, Cleveland Clinic must look to acquisitions for growth, CEO Dr. Toby Cosgrove said.
Acquiring other hospitals or health systems would help the Clinic grow in size financially, as well as add new service lines and recruit better talent, Cosgrove told employees in his annual “State of the Clinic” address, Crain’s Cleveland Business reported.
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“We’ve had a number of people from around the country approach us about some sort of merger and acquisition,” Cosgrove said. “We are carefully looking at each one of those and will continue to do so going into the future.”
The Clinic certainly isn’t alone in its quest for acquisitions. A wave of mergers, consolidations and joint ventures has been overtaking the healthcare industry in the wake of federal health reform, The New York Times reported last year. Hospitals are increasingly buying medical practices that competed with each other and groups of doctors are merging their practices, for example.
However, the Clinic hasn’t been particularly acquisitive as of late. Instead, the renowned health system has been focused on establishing affiliation agreements, in which the Clinic shares best practices with various hospital systems around the country. Earlier this month, the Clinic announced its first-ever adult oncology affiliation deal, which it struck with a hospital in suburban Chicago.
Most of the Clinic’s affiliation deals have involved its top-ranked heart care program, such as two partnerships with North Carolina hospitals it announced in September.
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The last acquisition the Clinic announced was of a three-location Western Ohio cancer care group in November.
But, as Cosgrove indicated, expect the Clinic to look beyond Ohio and “around the country” for future acquisition targets.
Despite the talk of acquisitions to secure the Clinic’s financial future, Cosgrove said the health system’s financials “have never been stronger,” according to Crain’s.
2011 operating revenue came in around $6.2 billion.
Cosgrove added another financial tidbit: He expects federal health reform to take a $237 million bite out of the Clinic’s revenue in 2016.
In last year’s “State of the Clinic” address, Cosgrove said health reform would cost the health system $174 million in revenue in 2015.