Study: Hospital Mergers Generating Value for Patients, Communities

by Elizabeth Hofheinz, M.P.H., M.Ed., September 27, 2019

Charles River Associates has augmented its 2017 report with new research titled, Hospital Merger Benefits: Views from Hospital Leaders and Econometric Analysis – An Update. New research released today confirms the significant value hospital mergers can generate for patients and their communities.

This new report mirrors the 2017 document indicating that “hospital mergers result in benefits that accrue to patients in the form of better care and reduced costs.”

“In this era of rapid change within the health care sector, hospitals and health systems remain committed to meeting the needs of all patients,” said Rick Pollack, AHA president and CEO. “Mergers have become one of the critical means through which hospitals can provide their communities with high-quality, convenient and cost-effective care. The benefits of mergers allow hospitals to create connected networks of care and keep the focus where it belongs: on improving care for the patient.”

“The newest analysis demonstrates that mergers can lead to enhanced quality through the expansion of clinical best practices, as evidenced by statistically significant declines in the rates of readmission and mortality rates following mergers,” says the news release.

“The study highlights how scale is increasingly critical to maintain and enhance the infrastructure necessary to address social determinants of health, adopt population health strategies and promote value-driven care.”

“In addition, integration can ensure that local access to care and breadth of services are maintained for patients, and in some cases expanded. Mergers can offer financial stability for struggling hospitals through operational efficiencies associated with shared costs for expensive IT infrastructures and purchasing, access to a robust network of system resources, equipment and facility upgrades. Newly integrated systems are also able to provide patients with access across the full continuum of care. This leads to more regular and convenient access to physicians, including specialists.”

Key findings also include:

• Mergers decrease costs. Due to increased scale, acquisitions decrease costs and are associated with a statistically significant 2.3% reduction in annual operating expenses.  
• Mergers often facilitate quality improvement through updating clinical operations across a health system, implementing consistent best practices and enhancing the promise of technology and data analytics. 
• Revenues per admission at acquired hospitals decline by a statistically significant 3.5% relative to non-merging hospitals, which suggests that “savings that accrue to merging hospitals are passed on to patients and their health plans.”

“The report includes findings from structured interviews with 10 health systems, which identified a number of areas in which mergers and acquisitions have eased cost pressures and expanded access. The update also supplements previous econometric analysis with data on cost, quality and revenue measures for hospital transactions from 2015 to 2017.”

Monica Noether, Ph.D., vice president at CRA and the paper’s lead author said, “Health system leaders consistently spoke of the heightened pressure to provide better care more efficiently. Our econometric research indicates that the scale that hospital mergers can provide results in the cost-effective delivery of high-quality care.”

Asked to comment on the report, Pierce D. Nunley, M.D., orthopedic spine surgeon, Director, Spine Institute of Louisiana and board of directors member of Specialists Hospital of Louisiana, told OSN, “Unfortunately, cost savings and quality are not necessarily linked. Quality of care could likewise be adversely affected by some of the complexities of a larger system. Decreased revenue could be a matter of accepting lower contracts that, although they may be passed down to the insurance companies, there is no evidence that those would be ‘passed on to patients’ in this ever-increasing insurance premium market.”

“Increased quality, decreased expenses, and optimized patient access can be easier in a smaller system as long as the proper goals are set, and subsequent plans executed. We have demonstrated that at Specialists Hospital of Louisiana.”