As the healthcare landscape evolves, many hospitals are strategically reassessing their assets to optimize financial position. Among these strategies, monetizing non-core assets has emerged as a promising avenue. Non-core assets are tangible or intangible resources owned by a hospital or health system that do not directly contribute to patient care delivery, like clinical labs, retail pharmacy operations, and physical therapy facilities, among others. Monetizing these assets involves a balance sheet–oriented approach where hospitals convert owned assets into cash, often by partnering with third parties to manage non-core services.
The decision to monetize non-core assets is driven by hospitals’ strategic imperative to reinvest proceeds into core services, particularly inpatient care, and expand their ambulatory footprint. By reallocating resources toward core functions, hospitals can enhance operational efficiency, improve clinical outcomes, and better meet the evolving needs of their communities.
Step 1: Identify Non-Core Assets
First and foremost, hospitals need to identify non-core assets ripe for monetization. This involves discerning what is essential for the hospital’s core functions. Non-core assets, although valuable, may not directly contribute to patient care or operational efficiency. Assets that are peripheral to the core mission or can be efficiently outsourced without compromising the quality of care are prime targets.
Among the non-core assets ripe for monetization are outpatient clinical labs, retail pharmacy operations, durable medical equipment (DME), home health and hospice services, and outpatient rehab and physical therapy facilities. These assets, while valuable, may not align closely with a hospital’s core mission of providing inpatient and ambulatory care. As such, hospitals are increasingly exploring opportunities to divest these assets to strategic buyers such as LabCorp, Quest, CVS, RiteAid, Walgreens, and other industry leaders.
Step 2: Value Non-Core Assets
Once potential assets are identified, hospitals engage in a thorough valuation process. This includes evaluating the asset’s historical performance, market demand, potential for growth, and competitive landscape. Additionally, hospitals should assess the impact of asset divestiture on patient care and overall operations.
Determining the value of non-core assets poses a multifaceted challenge. These assets are often deeply ingrained in the hospital’s financial reporting and economics. For accurate financial reporting, creating a profit-and-loss statement reflective of the divested line of business (LOB) requires meticulous accounting. Hospitals must allocate direct costs associated with the asset, including labor, supplies, and facility expenses. Moreover, indirect costs such as administrative overhead and shared services must be prudently apportioned to accurately reflect the asset’s contribution to the hospital’s financial performance. This comprehensive approach ensures a true representation of the asset’s financial performance and its impact on the hospital’s bottom line.
Step 3: Find the Right Partner
Collaboration with third-party partners is integral to the monetization process. Hospitals seek partners capable of seamlessly integrating the outsourced service while maintaining or enhancing quality standards. When seeking the right partner, hospitals should prioritize entities with a proven track record of excellence in the relevant service area. Negotiating favorable terms and agreements that safeguard patient interests and uphold operational excellence is paramount. Establishing clear communication channels and alignment on goals and expectations is crucial for a successful partnership.
By unlocking the latent value of these non-core assets, hospitals can bolster their financial position while maintaining focus on core patient care objectives. However, success hinges on careful planning, comprehensive valuation, and strategic partnerships that prioritize patient outcomes and operational excellence. Finally, there may be a range of governance, regulatory, and legal considerations, which should also factor into the process and decision.
