#AHCJ18 panel to examine impact of hospital consolidations on costs

Last year, there were 115 hospital and health system mergers and acquisitions – the highest number recorded in recent history, according to a report from Kaufman, Hall & Associates, a management consulting company that tracks M&A deals in health care.

The number and size of these transactions are transforming the health care system, the company said: “The implications reach far beyond the unprecedented number of individual transactions. Organizational size and scale have mattered for decades – but today, they are proving to be imperatives.”

The most pressing question for journalists and consumers is this: How will hospital consolidations affect healthcare costs? A session at Health Journalism 2018 will examine this question in detail and report on the evidence of what makes hospital or health system mergers effective and how they benefit consumers.

Reprinted with permission, Kaufman Hall & AssociatesIn a report earlier this year, the consulting firm Kaufman, Hall & Associates reported 115 hospital and health system mergers and acquisitions in 2017, the highest number recorded in recent history. The number and size of these deals are transforming the health care system, Kaufman Hall said.

The panel, “How hospital consolidations are affecting the cost of health care,” will include two experts representing hospital and health systems in Arizona. One is Chuck Lehn, president of Banner Health Network, an accountable care organization in Phoenix that has 5,000 affiliated physicians and advanced practice providers and operates 15 Phoenix-area hospitals and eight health centers and other medical facilities. Also contributing will be Dennis Laraway, chief financial officer of Banner Health, one of the nation’s largest nonprofit health care systems.

Another panel member will be R. Adams Dudley, M.D., M.B.A., a professor of medicine and health policy at the University of California, San Francisco. He also is director of the UCSF Center for Healthcare Value and associate director for research of the Philip R. Lee Institute for Health Policy.

We will have a representative of the health insurance industry: Paul Rooney, vice president of carrier relations for eHealth, which is an online marketplace for consumers seeking health insurance.

When one hospital or health system proposes to acquire or merge with another, the parties involved almost always claim that patients will benefit from reduced costs and increased quality. However, where is the evidence for these claims? In this recent article, “Hospital consolidation has a spotty track record, experts say,” Jeff Byers at Healthcare Dive cited several examples of how the quality of care declined and costs rose.

For more information, see this report from the National Bureau of Economic Research: The Price Effects of Cross-Market Hospital Mergers.

Among the questions the panel plans to address are:

  • Will the large number of deals done in 2017 continue this year? As hospitals and health systems become larger, what will become of smaller, community hospitals in rural areas? Last month, Brian Alexander reported for The Atlantic on how “America’s Rural Hospitals are Dangerously Fragile.” In his article, he reported that consolidation in health care is threatening small, independent hospitals.
  • Will consumers be left behind as hospitals and health system pursue goals beyond what patients need? Among hospital and health system administrators, increased M&A activity was driven by the need for greater intellectual capital, improved network infrastructure, risk-bearing capabilities, clinical and business intelligence, capital resources, and more diversified operations, Kaufman Hall reported.
  • What effect will non-traditional companies such as Amazon and Apple have as they become more involved in health care?

The panel begins at 1:40 p.m. on Friday, April 13. To follow or comment on the session, use the Twitter hashtag #AHCJmergers.

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