acquisitions, alliances, and joint ventures. Further, following Bazzoli et al. (2004), I focus on these forms of collaboration among hospitals and physician groups—the two most important organized providers of health care services.
A merger is the consolidation of two or more firms, including the pooling of their assets, into a single legal entity. The terms merger and acquisition often are used interchangeably, but there is a technical difference between them: mergers are consolidations of equal partners, while in acquisitions one organization buys the assets of another.
In contrast to mergers are alliances, which are voluntary, formal arrangements among two or more organizations for the purposes of ongoing cooperation and mutual sharing of gains and risks (Zajac et al., 2010). Alliances are similar to mergers in that often they are formed for strategic purposes; that is, they aim to promote an organization’s mission and enhance organizational performance. Yet, members of alliances retain their legal independence; indeed, some alliance agreements are more informal than formal, and may involve little commitment of partners’ resources.
A joint venture is a formal agreement in which parties unite to develop, for a finite time, a new legal entity by contributing funds or resources of some kind (e.g., labor). The partners exercise control over the new organization and consequently share revenues, expenses, and assets. Because the cost of starting new projects is generally high, a joint venture allows both parties to share the burden of the project, as well as any resulting profits.
In sum, I focus on mergers, alliances, and joint ventures because they represent a continuum of approaches to collaboration among health care organizations, ranging from those that change the legal status of organizations (e.g., mergers and acquisitions) to those that involve the pooling of only limited resources among partners (e.g., joint ventures) to those that are less formal and involve commitments of fewer resources than either mergers or joint ventures (e.g., alliances) (Zajac et al., 2010). Figure D-1 shows the conceptual framework that guides this review and discussion.