Hospitals and other healthcare companies stand a better chance of garnering support for their mergers if they can demonstrate to regulators and communities some sharing of savings with consumers, according to a new report by the Healthcare Financial Management Association.
Traditionally, healthcare consolidations have not led to lower prices and higher quality care, according to 10 healthcare experts whose comments were compiled for the HFMA's third installment of its Health Care 2020 series.
That has led to fierce regulatory pushback. Prime examples are the Federal Trade Commission's opposition to the proposed Penn State Hershey Medical Center and PinnacleHealth System merger in Pennsylvania and a proposed tie-up between Advocate Health Care and NorthShore University HealthSystem in the Chicago area.
“When it comes to consolidation, motivation matters,” HFMA CEO Joseph Fifer wrote in an introduction to the report.
Merger activity is hot and is likely to stay so as providers search for capital to make the transition from fee-for-service to value-based reimbursement that rewards and penalizes hospitals and doctors for the quality and cost of the care they provide, the study reports.
Among hospitals, there were 102 separate merger deals in 2015 involving 265 hospitals, according to a chart in the study. Those numbers are historically high with no end in sight, the authors said.
Mergers should result in improving access and collaboration between hospitals and doctors to manage patient populations, the authors note.
Among those interviewed for the study were Harvard Business School professor Leemore Dafny, 4SightHealth CEO David Johnson, Privia Medical Group COO David Young and Dr. Chris Stanley, vice president of population health at Catholic Health Initiatives.
The HFMA has also released reports focused on consumerism and the transition to value.
If history is a guide, most hospital mergers will result in higher prices for employers and consumers, the study said.
But increasing cost transparency across the country coupled with new value-based incentives to better coordinate care will pressure merger partners to return some of the benefits from economies of scale and shared purchasing to patients.
The added benefit to consolidators could be more favorable treatment from regulators intent on keeping mergers from creating an anti-competitive dynamic in markets.
“The healthcare landscape is changing,” the authors concluded. “Ultimately, it will be incumbent upon healthcare organizations to prove that these changes have created an environment in which consolidation does in fact improve value to the healthcare consumer.”