Hospital mergers and acquisitions are traditionally driven by the need of one of the partners to improve its financial position. Mergers help hospitals achieve this end goal by improving efficiency but also through increasing market share and improving negotiating power with both vendors and payors — the latter two of which often lead to increased healthcare costs, says Bruce A. Boissonnault, president and CEO of the Niagara Health Quality Coalition in Amherst, N.Y.
"Most hospital mergers have not proven to succeed in terms of reducing operating costs, and virtually all lead to higher prices for the same services," says Mr. Boissonnault. "Given the current marketplace, many hospitals are forced to merge to survive, but there are opportunities to improve coordination and patient-centeredness through integration that should not be overlooked. Integration is the key to quality, and without it, patient quality cannot be managed effectively."
Increased M&A activity
While a certain amount of merger and acquisition activity in the hospital space can be attributed to provisions within healthcare reform that reward coordinated care, other merger activity is a result of a natural reaction in any market: when buyers of services get bigger, so do the sellers.
"In any economic system, when the people who buy the services get bigger, those that sell services get bigger as well to protect their ability to price profitability," says Mr. Boissonnault. He reports that the four largest insurers in the United States now cover roughly half of all privately insured persons; and insurers continue to acquire other insurers, creating an impetus for healthcare providers to consolidate as well.
A unique opportunity
While not all mergers may be able to achieve reduced costs for consumers, they do present a unique opportunity to improve the quality of care patients receive. "Integration and patient-centered care are the best ways to improve the care given to patients, and opportunities to engage physicians in activities around these goals often present themselves most favorably during merger activities. To miss such opportunities is to deny patients the most important benefit they are likely to see as a result of such mergers," says Mr. Boissonnault.
For example, newly merged entities can use the opportunity to get physicians and the hospital on interoperable electronic health records so data can be shared and analyzed. It's also a great time to begin involving physicians in enacting rewards for quality that extend from the hospital setting into the offices of referring physicians to ensure seamless processes of care and to reduce preventable readmissions.
"You cannot improve care without integrating hospital care with ambulatory care more effectively. A merger or sale is the perfect opportunity to eliminate the silos that may exist and improve information flow to create better integrated care for the patient across the community," says Mr. Boissonnault.
The support of the referring physicians weighs heavily on any hospital merger or sale. As such, hospitals leaders spend a great deal of time "selling" a transaction to its medical staff. According to Mr. Boissonnault, the promise of improved quality and integrated care can be used as a tool to move the merger forward.
"A merger presents a once in a generation opportunity to transform care," says Mr. Boissonnault. "If you miss it, you likely won't see it again in your career."
Learn more about the Niagara Health Quality Coalition.
"Most hospital mergers have not proven to succeed in terms of reducing operating costs, and virtually all lead to higher prices for the same services," says Mr. Boissonnault. "Given the current marketplace, many hospitals are forced to merge to survive, but there are opportunities to improve coordination and patient-centeredness through integration that should not be overlooked. Integration is the key to quality, and without it, patient quality cannot be managed effectively."
Increased M&A activity
While a certain amount of merger and acquisition activity in the hospital space can be attributed to provisions within healthcare reform that reward coordinated care, other merger activity is a result of a natural reaction in any market: when buyers of services get bigger, so do the sellers.
"In any economic system, when the people who buy the services get bigger, those that sell services get bigger as well to protect their ability to price profitability," says Mr. Boissonnault. He reports that the four largest insurers in the United States now cover roughly half of all privately insured persons; and insurers continue to acquire other insurers, creating an impetus for healthcare providers to consolidate as well.
A unique opportunity
While not all mergers may be able to achieve reduced costs for consumers, they do present a unique opportunity to improve the quality of care patients receive. "Integration and patient-centered care are the best ways to improve the care given to patients, and opportunities to engage physicians in activities around these goals often present themselves most favorably during merger activities. To miss such opportunities is to deny patients the most important benefit they are likely to see as a result of such mergers," says Mr. Boissonnault.
For example, newly merged entities can use the opportunity to get physicians and the hospital on interoperable electronic health records so data can be shared and analyzed. It's also a great time to begin involving physicians in enacting rewards for quality that extend from the hospital setting into the offices of referring physicians to ensure seamless processes of care and to reduce preventable readmissions.
"You cannot improve care without integrating hospital care with ambulatory care more effectively. A merger or sale is the perfect opportunity to eliminate the silos that may exist and improve information flow to create better integrated care for the patient across the community," says Mr. Boissonnault.
The support of the referring physicians weighs heavily on any hospital merger or sale. As such, hospitals leaders spend a great deal of time "selling" a transaction to its medical staff. According to Mr. Boissonnault, the promise of improved quality and integrated care can be used as a tool to move the merger forward.
"A merger presents a once in a generation opportunity to transform care," says Mr. Boissonnault. "If you miss it, you likely won't see it again in your career."
Learn more about the Niagara Health Quality Coalition.