Health Care Strategic Alliance Deals: The Practical Aspects

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Health Care Strategic Alliance Deals: The Practical Aspects

Andrew J. Demetriou*

Berkeley Research Group LLC

Lamb & Kawakami LLP

Los Angeles, CA

Dawn R. Crumel

Shipman & Goodwin LLP

Washington, DC

Many hospitals are contemplating clinical and financial affiliation with other hospitals and systems through the formation of strategic alliances, rather than through traditional merger and acquisition transactions. Strategic alliances are “mutually beneficial long-term formal relationship[s] formed between two or more [hospitals] to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations.”1 Goals of a health care strategic alliance may include: economies of scale, population health management, improvements in clinical care delivery, and increased physician engagement. Based on the individual and group goals of participating hospitals, strategic alliances vary greatly in structure. This article addresses a number of practical considerations that should guide parties to a prospective alliance in the decision to form an alliance and the ultimate outcome of negotiations.

Before making a long-term, complex commitment to an alliance, the parties should consider a number of practical business, governance, and operational issues that ultimately will shape the performance of the alliance and affect the agreements necessary to accomplish the parties’ objectives. Counsel to prospective partners in an alliance should be sensitive to these considerations, and even drive discussion of them, to ensure that the parties’ intent is reflected in documentation.

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