Most of the acquisitions in recent years involved larger systems, usually not-for-profit, taking over struggling smaller hospitals. Those community facilities had little or no access to the capital required to adopt the new technologies—both medical and managerial—that they need to achieve higher-quality and lower-cost care.
Large not-for-profit systems today are pursuing an acquisition strategy that for-profit hospital chains pioneered decades ago. They looked for struggling community hospitals where their superior management expertise and access to capital allowed them to generate immediate savings by streamlining operations.
The larger system brings the money and expertise to put new systems in place that can deliver higher-value care. Enormous efficiencies can be achieved by integrating acquired hospitals into a fully functional electronic health-record system, for instance, or standardizing care practices across operations.
Consolidation also allows for elimination of duplicate levels of top management. Picking that low-hanging fruit shows the troops in the trenches that the mandate to cut costs is real because it starts at the top.
There's little evidence that the latest merger wave is lessening competition in the vast majority of markets. In most places, especially in large cities, there are too many hospitals or hospital beds, not too few.
But that isn't to say that giant systems and individual hospitals can't use their market power to demand prices not warranted by their costs or quality. Prestige hospitals in highly competitive markets command premiums because no insurer would dare exclude them from their networks. Sophisticated managers at competing large systems can engage in the veneer of competition—seen any ads for Da Vinci robots lately?—but not its heart and soul, which involve price and quality.
