The explosive growth of systems reshaped the healthcare industry in the past 25 years.
These conglomerations thrived because hospitals sought to capture the market share, efficiencies and integration they didn't think they could ever achieve on their own.
It was a trend healthcare executives saw early on. A systems survey published in Modern Healthcare in 1977 predicted that the "chain method of hospitals, whether by ownership or management," would be the future of the industry because small hospitals needed the multihospital expertise and shared services to survive.
Much of what spurred the growth of systems in the ensuing years were changes to reimbursement systems, including the shift to a fixed-rate payment system for Medicare inpatient stays in 1983 and the rise of managed-care plans.
More than 45% of the nation's 4,956 community hospitals were part of a system in 1999, according to the most recent data available from the American Hospital Association. That's almost a 28% jump in the number of hospitals belonging to systems since 1981, the first year the AHA collected data.
But the marriages that led to the development of many systems have fallen short of their promise, and divorces are on the rise with hospitals leaving systems to again try to make it on their own. Systems are splitting because the efficiencies once envisioned were never achieved, disparate corporate cultures didn't mesh or market conditions changed.
The "own everything" mentality of systems also has subsided with many systems spinning off ancillary units-namely health plans and physician practices-that they discovered just weren't good for business.