The Search for Scale

by | Dec 16, 2010

Irving Levin Associates, a publisher of business intelligence for the health care industry, reported in October that spending on mergers and acquisitions in healthcare has risen 44% from the previous quarter. The article’s editor, Sanford Steever, PhD states, “Building on a strong year, health care companies have already begun to position their business for 2011 and beyond.” Anyone familiar with long term care understands that consolidation in this industry is a reality that affects suppliers, purchasing companies, and long term care managers alike. In just that the last few months alone, companies such as Kindred (who purchased 5 long term acute care hospitals and 3 skilled nursing facilities) and Ventas (who just purchased 118 skilled nursing homes from Atria) have further increased their grasp on the long term care market. What’s driving this trend over the past decade? One factor is that seniors 85+ are expected to grow 3x the current population over the next 35 years (according to the US Census). Another factor is that it’s simply a solid strategic business move for investors. Says Steever, “They will continue to pursue M&A to grow their businesses, achieve economies of scale and consolidate fragmented industries.”

As an owner of one home or a few homes, this consolidation should be worrisome. These corporations can leverage their scale to heavily influence suppliers to keep their costs low and they can utilize their deep pockets to revamp the facilities. So what to do? That’s where Prime Source comes in. Prime Source gives your facility access to scale. With the purchasing ability of over 120 homes, we are undoubtedly buying at cheaper prices (between 10 to 30%) than a single facility or group of facilities. This cost savings will help single and group facility owners compete on cost with the larger corporations. These cost savings can be rolled into cap ex projects that keep facilities refreshed and up to date.

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