Date of Award

Fall 10-3-2016

Degree Type

Dissertation

Degree Name

Executive Doctorate in Business (EDB)

Department

Business

First Advisor

Conrad S. Ciccotello

Second Advisor

Patricia Gregory Ketsche

Third Advisor

Wesley J. Johnston

Abstract

This is a quantitative study of archival data that examines Merger and Acquisition (M&A) activity using currently established healthcare quality and financial performance metrics. The research seeks to explicate the relationship between M&A activity and M&A experience in the healthcare industry as it relates to initiatives aimed at improving the quality and decreasing the cost of healthcare. The Affordable Care Act (ACA) legislation appears to be contributing to a trend toward M&A consolidation; by illuminating how this trend potentially impacts healthcare quality and cost reduction initiatives, this study’s contribution is both useful and practical. The units of analysis are Medicare reporting hospitals, hospital systems, and related healthcare providers that have or have not experienced an M&A or multiple M&As.

The study shows a statistically significant improvement in quality each year from 2006–2014, which is reflected in higher scores for the four quality metrics measured. M&A activity, as measured by acquisition status and acquirer experience, did not appear to influence these quality metrics, with the exception of the heart failure measure, which showed a statistically significant positive influence of acquirer experience across all specifications.

M&A activity’s possible effects on hospital financial performance was assessed through operating-cost-to-charge and capital-cost-to-charge ratios (CCRs). The operating CCR appears to be positively influenced by both acquisition status and acquirer experience, while the capital CCR was positively influenced only by acquirer experience. A positive influence is reflected in a decreasing ratio.

Results on quality improvement over time, both before and after the ACA, suggest that the ACA itself may not be the driver for quality improvement. Similarly, decreases in OCCR occurred consistently and statistically significantly over time, both pre- and post-ACA, while CCCR showed statistically significant decreases in 2006–2008, 2013, and 2014. These results appear to support the notion that the trend was ongoing before the ACA was enacted and gave these measures high-profile exposure.

This is a quantitative study of archival data that examines Merger and Acquisition (M&A) activity using currently established healthcare quality and financial performance metrics. The research seeks to explicate the relationship between M&A activity and M&A experience in the healthcare industry as it relates to initiatives aimed at improving the quality and decreasing the cost of healthcare. The Affordable Care Act (ACA) legislation appears to be contributing to a trend toward M&A consolidation; by illuminating how this trend potentially impacts healthcare quality and cost reduction initiatives, this study’s contribution is both useful and practical. The units of analysis are Medicare reporting hospitals, hospital systems, and related healthcare providers that have or have not experienced an M&A or multiple M&As.

The study shows a statistically significant improvement in quality each year from 2006–2014, which is reflected in higher scores for the four quality metrics measured. M&A activity, as measured by acquisition status and acquirer experience, did not appear to influence these quality metrics, with the exception of the heart failure measure, which showed a statistically significant positive influence of acquirer experience across all specifications.

M&A activity’s possible effects on hospital financial performance was assessed through operating-cost-to-charge and capital-cost-to-charge ratios (CCRs). The operating CCR appears to be positively influenced by both acquisition status and acquirer experience, while the capital CCR was positively influenced only by acquirer experience. A positive influence is reflected in a decreasing ratio.

Results on quality improvement over time, both before and after the ACA, suggest that the ACA itself may not be the driver for quality improvement. Similarly, decreases in OCCR occurred consistently and statistically significantly over time, both pre- and post-ACA, while CCCR showed statistically significant decreases in 2006–2008, 2013, and 2014. These results appear to support the notion that the trend was ongoing before the ACA was enacted and gave these measures high-profile exposure.

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