Doug Hastings, a Member of the Firm in the Health Care and Life Sciences practice, in the Washington, DC, office, was quoted in an article titled "Building Blocks for Organizational Change."

Following is an excerpt:

Hospitals and health systems are contemplating organizational changes largely because of changes in payment policy among both public and private payers, says Douglas A. Hastings, JD, an attorney at Epstein Becker Green in Washington, D.C. For example, many providers hope a partnership, affiliation, or change in ownership will afford them the cost savings and increased scale needed to compete in an era of reform and to better meet quality-of-care requirements under emerging payment models. Approached correctly, scale can result in higher-quality care and service at a lower cost, Hastings says.

The first step for hospitals and health systems in assessing organizational change options should be to undertake a strategic review of their organizations and markets, Hastings says. They should understand their markets' dynamics relative to payment changes and examine their own readiness to participate in value-based payment models. "Look at the value proposition out to 2020," he says.

"A key consideration is the immediacy of the organization's need for capital: Is it a short-term need or a longer-term need?" Hastings says. "If there is an immediacy to the need for capital, either for short-term survival or for a project that can't wait, the organization may be compelled to sell some or all of its assets or to pursue a more permanent partnership, which could cause the organization to miss an opportunity for a partnership that could better position it for revenue sustainability or growth over time."

After comprehensively assessing their current circumstances, the next step for hospitals and health systems should be to consider possible partners that can help them move toward value-based payment models or gain access to capital, Hastings says. For example, some potential partners may have better payer relationships than other candidates.

For the third step, Hastings recommends that hospitals and health systems consider what new organizational structure options are available and best fit their capabilities and goals. "If the organization is considering a collaboration for longer-term market positioning, for example, it might lead to a whole-hospital or whole-system arrangement, but it might also lead to other forms of collaboration, such as an accountable care organization or some sort of other network arrangement," he says. "We continue to see change-of-control types of transactions, but more and more parties are looking for ways that they can joint venture or collaborate in ways that do not involve a change of control."

Finally, providers should assess which components need to be part of the any organizational change to fit their goals and their culture, Hastings says. Key details include the type of governance of the new organization.

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