The Dangers of "Too Big to Fail" Hospital Systems

Organizations deemed "too big to fail" pose a risk in any industry. In healthcare, integrated health systems may grow so large that they technically survive, but fail in other aspects of patient care, according to a recent blog post from Not Running a Hospital.

In his blog, Paul Levy, former CEO of Beth Israel Deaconess Medical Center in Boston, said there are "dangerous ramifications" if a hospital network achieves status as a "too big to fail" institution in a given geographic area. This is one serious factor to consider as health systems consolidate physician practices, health plans, large medical groups, home health agencies and other care settings.

Mr. Levy goes on to quote a paper written by his colleague Boaz Tamir. In that paper, Mr. Tamir discusses how organizations that "cannot fall" begin to deteriorate from within.

First, the large organization will begin to operate from within a bubble. Prices for its services are determined according to the organization's operating costs. Leaders within the organization begin to oppose any change. There will be inaction, and administrative or systematic failures will not be repaired. In many ways, the organization will begin to collapse from the inside-out, according to Mr. Tamir's paper.

"When there are no mechanisms for seriously assessing its efficiency, nothing will lead management to insist on operational excellence, attract professionals and excellent workers, prevent waste, reduce hidden unemployment and focus on creating value for the customers — the declared goal of an organization that operates in a competitive environment and is not immune to a fall," Mr. Tamir wrote.

More Articles on Hospital Consolidation:

5 Long Hauls for Hospitals and Health Systems
17 Healthcare Niches — Observations for 2013
11 Most Pressing Issues for Hospital CEOs

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