As hospitals and health systems continue to face challenges like mounting financial pressures, workforce shortages and the rapid integration of new technologies, many organizations are rethinking their growth strategies – moving beyond local mergers toward regional and multi-state expansions.

Some of these expansions include New Hyde Park, N.Y.-based Northwell Health and Danbury, Conn.-based Nuvance Health, which merged in early May to create a $22.6 billion integrated system that spans from New York City to western Connecticut. The system now features 28 hospitals, more than 104,00 employees, over 1,050 ambulatory care sites and 73 urgent care centers.

In January, Sioux Falls, S.D.-based Sanford Health and Marshfield (Wis.) Clinic Health System also merged into a nonprofit integrated system and now operate as Sanford Health. The merger created a 56-hospital system with 4,500 providers, around 56,000 employees, two fully integrated health plans, and assorted research institutions and specialty pharmacies.

Lastly, in December, Greenville, S.C.-based Prisma Health acquired Maryville, Tenn.-based Blount Memorial Hospital. The 304-bed community hospital is the first to join Prisma outside of South Carolina. The 19-hospital system also shared plans to invest at least $364 million into Blount Memorial.

Becker’s connected with Prisma Health Executive Vice President and CFO Matt Elsey, Nuvance Health COO Michelle Robertson and Sanford Health Executive Vice President and CFO Nick Olson to discuss how crossing state lines is becoming a key lever for long-term sustainability, scale and competitive advantage.

Editor’s note: Responses have been lightly edited for clarity and length.

Question: What are the key financial or strategic drivers pushing health systems to expand across state lines?

Matt Elsey. Executive Vice President, CFO, Prisma Health (Greenville, S.C.): For certain health systems, such as Prisma Health, inorganic growth opportunities may be limited within their existing statewide footprint.

Therefore, evaluating regional expansion opportunities becomes a key strategic consideration to foster additional growth and long-term sustainability. Generally, we believe that expansion into contiguous states enables quicker integration and more accretive financial performance.

Michelle Robertson. COO, Nuvance Health, now part of Northwell (Danbury, Conn.): With constant pressure to reduce costs for care, affiliations capturing a broader geography of lives served are critical to financial growth and stability. Advances in virtual care technologies and unified national standards have erased many traditional boundaries for health systems.

Our recent affiliation between Northwell [and] Nuvance Health, which was already operating in multiple states, shows that with aligned missions, robust planning and processes, multistate expansion is not only feasible — it’s increasingly the norm.

Nick Olson. Executive Vice President, CFO, Sanford Health (Sioux Falls, S.D.): Workforce challenges, rising costs and the pace of innovation are simply too big for any one organization to tackle alone. Scale isn’t optional anymore — it’s necessary to strengthen access, quality and sustainability. Geographic diversity also adds long term durability — serving multiple states and communities creates more growth opportunities while also preventing economic headwinds that could persist in any one state or geography.

Partnering with like-minded, nonprofit care delivery organizations across geographically contiguous state lines in the rural Midwest has enabled us to expand specialty services, improve quality outcomes, recruit providers and accelerate local investment. For example, since merging with Medcenter One in Bismarck, N.D., in 2012, we’ve increased provider recruitment by more than 54%, added several new service lines and expanded specialty access.

Stability is also important to physicians — in fact, some providers at Marshfield Clinic Health System who left prior to the combination with Sanford Health have returned because they are optimistic about our organization’s financial outlook. These combinations build the resiliency needed to meet patient and community needs today and in the future.

Q: How is regional expansion reshaping the competitive and payer landscape in your markets?

ME: Regional expansion is undoubtedly creating a more competitive landscape, and we have strategically prepared to operate in a non–certificate of need environment in South Carolina. Notably, we are observing increased competition leading to higher labor costs, as organizations vie for talent — particularly providers, nurses and other direct patient care staff. We are also seeing a rise in joint venture partnerships that facilitate rapid growth and development across various ambulatory services.

MR: Regional growth is reshaping local healthcare landscapes, giving patients more options and spurring providers to elevate their performance. The result? Better care for consumers and heightened accountability for healthcare organizations.

NO: Combinations across the upper rural Midwest have brought new services, innovative care models and broader clinical expertise to rural communities that would not otherwise have access.

For payers, regional scale in communities where a health system both provides care and operates a health plan creates more efficiency and stability. For example, by integrating Sanford Health Plan and Security Health Plan under a shared operating model, we are better positioned to reduce administrative overhead, modernize operations and provide a more coordinated patient experience that closes care gaps and improves outcomes. Expansion into new communities also allows us to create new relationships with other payers, and determine how we can best serve the needs of the local communities – together. Regional expansion strengthens communities while improving care.

Q: Looking five years ahead, what do you expect hospital consolidation to look like? How should finance leaders prepare?

ME: I anticipate continued consolidation over the next five years. Hospitals and health systems are already operating on very thin margins, and these challenges will likely be exacerbated by potential governmental payment reductions and ongoing labor and supply cost inflation.

As a result, more organizations may seek partnerships to ensure long-term sustainability. Finance leaders will need to serve as key strategic partners to the CEO, governance bodies and other stakeholders — whether pursuing partnerships with larger organizations or evaluating opportunities with entities seeking long-term success through collaboration.

MR: The next five years may hinge on political outcomes and evolving regulations. Healthcare leaders must stay agile, consistently prioritizing patient experience, quality, and convenience to thrive in an era of continuing consolidation. Northwell has proven time and again that it does this extremely well.

NO: Looking ahead, the math simply doesn’t work for organizations to tackle challenges — and opportunities — alone. Ongoing cost pressures, workforce challenges, reimbursement headwinds and the need for continuous investment in technology and innovation will drive more strategic, mission-aligned partnerships. The combinations that succeed will be those that are culturally aligned, and share a purpose and vision focused on expanding access, improving quality and sustaining care in the communities served.

Finance leaders should be preparing now by identifying opportunities for strategic partnerships that combine capabilities, resources and solutions-focused ideas to create efficiencies and build long-term stability. The organizations that thrive in the next five years will be those willing to harness collaboration and embrace innovation to ensure every patient, in every community, has access to the care they need to live healthier lives.

The post The multi-state M&A playbook: Preparing for growth beyond your footprint appeared first on Becker’s Hospital Review | Healthcare News & Analysis.