NYT: How the 'wave' of hospital mergers will affect the market

Standalone hospitals will struggle to stay independent in new health economy, analysts predict

Topics: Finance, Accountable Care, Market Trends, Strategy, ACO

August 14, 2013

The "biggest wave" of hospital mergers since the 1990s is creating large-scale hospital systems, and some economists and health care stakeholders are worried about how consolidation will affect market dynamics, Julie Creswell and Reed Abelson report for the New York Times.

According to the Times, consolidation is being driven by "a confluence of powerful forces," including changes to how health care will be delivered and paid for under the Affordable Care Act. One consulting firm predicts that 1,000 of the nation's nearly 5,000 hospitals could seek mergers within the next five to seven years.



Hospital executives say that they often have little choice but to merge in the evolving health care landscape, given increasing revenue pressures and a growing push to base more payments on care quality and efficiency. Mergers allow hospitals to devote more fiscal resources to improving their patient care, health care technology, and other services, executives argue.

However, federal regulators worry that an increase in mergers -- leading to ever-larger health systems -- could reduce competition and ultimately lead to higher insurance premiums, copayments, and out-of-pocket expenses. And some deals have involved Catholic health systems acquiring secular hospitals, raising new questions about patient access to contraception and other services.

Meanwhile, hospitals seeking to go it alone may find it difficult to compete with larger, leaner organizations, analysts predict. "There are hospitals out there that have been independent for 80 years and they’re saying, ‘We’re going to be independent for the next 100 years,'" says Lisa Goldstein of Moody’s Investors Service.

"That’s going to be a tall order," she adds. "As other hospitals consolidate and grow around you, whatever niche you had will vaporize" (Creswell/Abelson, Times, 8/12).

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