Weigh­ing con­sol­i­da­tion’s role in qual­ity, costs

Modern Healthcare - - 100 TOP HOSPITALS 2017 - Aurora Aguilar Edi­tor

Whether for scale or sur­vival, con­sol­i­da­tion con­tin­ues to be a tool for hos­pi­tals look­ing to curb the pres­sure of in­creas­ing costs and lower re­im­burse­ment. In fact, the wave of merg­ers, ac­qui­si­tions and in­creas­ingly cre­ative part­ner­ships is not ex­pected to sub­side.

Ac­cord­ing to the 2016 Health Care Ser­vices Ac­qui­si­tion re­port, the pace of provider con­sol­i­da­tion has grown 14% on av­er­age in the last seven years and most ex­perts agree that’s not likely to stop any­time soon.

The fed­eral gov­ern­ment has been just as busy re­ject­ing some of the big­ger deals. Be­tween 2006 and 2014, the Fed­eral Trade Com­mis­sion and the U.S. Jus­tice Depart­ment fought against 340 merg­ers or ac­qui­si­tions. Their rea­son? Big merg­ers sti­fle com­pe­ti­tion, neg­a­tively af­fect­ing con­sumers. That’s the op­po­site of what our part­ners at Tru­ven Health An­a­lyt­ics, IBM Wat­son Health have found—al­beit, in some cases, as Modern Health­care re­porter Maria Castel­lucci notes.

Econ­o­mists and pa­tient ad­vo­cates sup­port the Jus­tice Depart­ment’s rea­son­ing.

In stud­ies that were pub­lished and re­leased in re­cent months, ma­jor health­care merg­ers led to the in­dus­try tak­ing a beat­ing for lower qual­ity out­comes and higher costs. Glenn Mel­nick at the Univer­sity of South­ern Cal­i­for­nia’s Scha­ef­fer Cen­ter for Health Pol­icy & Eco­nom­ics an­a­lyzed Blue Shield of Cal­i­for­nia pay­ments and found that from 2004 to 2013, the av­er­age price for hos­pi­tal ad­mis­sions in Cal­i­for­nia in­creased 70%, from $9,183 to $15,642. The jump was even higher for the state’s big­gest hos­pi­tal chains, where the price for av­er­age ad­mis­sions grew from $9,183 to $19,606, or 113%. Cal­i­for­nia is home to such giants as Sut­ter Health and Dig­nity Health that have boomed through ac­qui­si­tions.

A white paper by re­searchers at the Cen­ter for Health Pol­icy at the Brook­ings In­sti­tu­tion and Carnegie Mel­lon Univer­sity’s Heinz Col­lege states the con­sol­i­da­tion trend had ef­fec­tively killed com­pe­ti­tion and the re­sult is ris­ing health­care costs, wide vari­a­tions in cost and un­even qual­ity of care.

With fewer com­peti­tors, hos­pi­tals can strong-arm in­sur­ers into lower prices, the re­searchers said. They of­fered ex­am­ples in which hos­pi­tals with fewer than four lo­cal com­peti­tors had prices nearly 16% higher on av­er­age—a dif­fer­ence of nearly $2,000 per ad­mis­sion.

As for qual­ity, less com­pe­ti­tion can lead to worse pa­tient out­comes, es­pe­cially when prices are set by reg­u­la­tors, as in the Medi­care pro­gram, ac­cord­ing to the paper. Medi­care ben­e­fi­cia­ries who ex­pe­ri­enced a heart at­tack had a 1.46 per­cent­age point higher chance of dy­ing within one year of treat­ment if they were treated by a hos­pi­tal that faced few po­ten­tial com­peti­tors, re­search shows. But Tru­ven’s re­search and our re­port­ing shows there are out­liers and lessons to be learned from them. Read on to learn more.

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