Henry Ford Health System had a big year in 2016 when it added Jackson-based Allegiance Health in April and Flint-based HealthPlus of Michigan earlier in February. The two acquisitions added about $800 million in annual revenue to the now $5.7 billion system and expanded its geographic reach by 75 miles to the west and 70 miles to the northwest and from five counties to eight.
So, how has Henry Ford, with its rich history as a Detroit-based integrated system with a 1,200-physician employed medical group and a 662,000-member health insurance company, fared since then?
By all accounts, if you talk with Henry Ford officials and physicians, the implementation of the merger has gone well. But experts say it takes years before determining success of failure with a major business acquisition or merger.
Robert Burns, chair of the health care management department at the Wharton School at the University of Pennsylvania, said research shows two-thirds of all corporate mergers, which includes hospitals and insurers, fail to achieve success as defined by the public: providing better coordinated care that leads to improved quality, lower costs and enhanced customer service.
"A successful merger is defined by what the hospital says it is, not what society is looking for," said Burns, a national expert who has studied hospital and physician mergers for more than 30 years.
"Reduced costs are what the public wants in a merger," he said. "Systems seek market power, market share, to weed out competitors" and to protect their pricing scheme against insurers, managed care organizations and employers.
Burns says hospital executives will never publicly acknowledge these goals, but the former hospital executive said private motivations never change.
In a 2015 study, Burns and fellow researcher Jeff Goldsmith looked at the performance of 15 "integrated delivery networks" in the U.S. as they added hospitals, physician organizations and managed care contracts where they assumed some financial risk. The research concluded there is little evidence that the mergers help to promote quality or reduce costs.
"Indeed, there is growing evidence that hospital-physician integration has raised physician costs, hospital prices and per capita medical care spending," the paper in the National Academy of Social Insurance concluded. "Similarly, hospital integration into health plan operations and capitated contracting was not associated either with clinical efficiency (shorter lengths of stay) or financial efficiency (lower charges per admission)."
The 15 systems studied included Henry Ford Health System, Advocate Health Care in Chicago and the University of Pittsburgh Medical Center, three health systems widely recognized as successful systems.
But Burns added that studies also show there is a great deal of variation in outcomes, depending on such factors as the leadership of the organizations, the market and how the mergers are implemented. Surveys also show employers don't believe hospital mergers reduce costs, but do lead to better care coordination and quality.
Bob Riney, Henry Ford's COO, said the health system approached the merger with Allegiance very differently than hospital combinations of the past.