A new wave of hospital consolidation looms

Andrew Van Dam

About Andrew Van Dam

Andrew Van Dam of The Wall Street Journal previously worked at the AHCJ offices while earning his master’s degree at the Missouri School of Journalism.

Nationally, the hospital consolidation craze has leveled off since its 2006 peak, but Kaiser Health News senior correspondent Julie Appleby, an AHCJ board member, reports that acquisitions are on the march again, especially in the mid-Atlantic region. Appleby found that this rising wave is due, in part at least, to health care reform and its emphasis on integrated care and Accountable Care Organizations.

Hospital leaders from Baltimore to Seattle say the health law approved by Congress in March gives them even more reason to merge with or buy rivals because of its emphasis on integrated systems where hospitals and doctors better coordinate care.

Also fueling the trend: More doctors want to be employed directly by hospitals, allowing them more job security without the hassles of running a business. But hiring groups of doctors can be an “expensive and daunting proposition” for a stand-alone facility, says Steven Thompson, senior vice president for Johns Hopkins Medicine.

Nationally and locally, he says, “it’s fair to say that (independent) hospitals are talking with everyone, feeling that they don’t want to be the last one standing.”

Other causes include increasingly contentious negotiations with insurers, more direct employment of doctors and access to the capital needed to adopt things like electronic medical records.

We were pointed to the KHN story by AHCJ Immediate Past President Trudy Lieberman’s cjr.org column, in which she compares hospital consolidation to HMOs and insurance consolidation.

It was good to see Appleby’s story, because the media pretty much gave hospitals a bye during the reform debate, instead making insurance companies the saga’s primary villains. Quietly, though, it seems the hospitals were up to the same thing as the insurers—organizing themselves into larger and larger groups with tons of market power to keep insurance premiums in the stratosphere.

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