Revenue at independent hospitals grew at a faster pace than health system-owned hospitals, suggesting that returns may be diminishing on mergers and acquisitions, new data show.
Net patient revenue at independent hospitals rose at an average rate of 4.8% from 2014 to 2018, compared with 4% at their system-owned peers, according to Definitive Healthcare's analysis of around 5,500 U.S. hospitals. That is likely in part due to the larger asset base of health systems, but also revenue gains from consolidation may be plateauing, said Kate Shamsuddin, senior vice president of strategy at Definitive.
"There are huge benefits in that strategy playing out related to managing costs better, among others, but we may be starting to reach the edge of a curve where mergers and acquisitions are having diminishing returns," she said. "We have seen such massive mergers over the past three to four years, and my sense is those are still effective moves, but the actual gain associated from it may be stabilizing more than anticipated."
System-owned hospitals were able to rein in expenses at a faster clip than independent hospitals, as expense growth stabilized to an average rate of 3.9% compared with 4.6% at their unaffiliated peers over that span. This buoys health system executives' claims that scale helps them reduce overhead thanks to bulk purchasing power and other factors.