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Good, bad or too tough to say? What 4 health system CEOs think of hospital consolidation

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There is a great deal of consolidation occurring in the healthcare industry today, and whether that is good or bad news to health system CEOs depends on their organization's market and M&A track record.

During a panel discussion at the Becker's Hospital Review 4th Annual CEO Roundtable + CFO/CIO Roundtable in Chicago, Chuck Lauer, former publisher of Modern Healthcare, asked the speakers to offer their thoughts on provider consolidation.

Here's how CEOs responded.

"All of consolidation is about protecting the economic interests of organizations."
Larry Goldberg, president and CEO of Loyola University Health System in Maywood, Ill., looks into a backyard rife with consolidation. In the Chicago metropolitan area, several organizations joined together or announced plans to do so in the past 18 months.

Despite all the M&A activity, "When you look here in the Chicago area, the reality is we haven't fundamentally changed healthcare with all the consolidation," he said.

In fall 2014, Downers Grove-based Advocate Health Care and Evanston-based NorthShore University Health System announced plans to consolidate and create a 16-hospital system called Advocate NorthShore Health Partners.

Chicago-based Northwestern Memorial HealthCare struck agreements with Winfield-based Cadence Health — a two-hospital system based approximately 35 miles west of Chicago — and DeKalb-based, two-hospital KishHealth, which will bring the total number of Northwestern care locations to 90.

Also, Hinsdale-based Adventist Midwest Health (part of Adventist Health System, Altamonte Springs, Fla.) and Arlington Heights-based Alexian Brothers Health System (part of St. Louis-based Ascension Health) also formed a joint operating company.

"We're seeing massive consolidation in the insurance industry and with hospitals. What we really see is people trying to get market share and have leverage. 'How do I protect what I have today? We'll get paid differently and try different things, but I need to get bigger.'"

"I don't think consolidation is per se good or evil."
Methodist Health System President and CEO Stephen Mansfield, PhD, said whether provider consolidation is a positive or negative event depends on the circumstance and how it is executed.

Dallas-based Methodist has tripled in size in the last nine years. However, it still has room to expand its reach, as it has the fourth greatest share in its market. "We've got an appetite to grow and consolidate," said Dr. Mansfield.

Although he sees consolidation as a good thing for his health system, Dr. Mansfield believes it should be done for the right reasons. "Too much consolidation has been about leverage and revenue," he said. Specifically, he is interested in consolidation that can take cost per discharge adjusted for case-mix down.

"The affiliation we've done with two smaller hospitals — it's not about leverage."
For Hugh Greene, president and CEO of Baptist Health in Jacksonville, Fla., consolidation was driven by a need for resources more than power.

In fall 2015, Baptist formed a regional alliance consisting of eight hospitals. Called Coastal Community Health and led by Mr. Greene as CEO, the alliance includes 335-bed Flagler Hospital in St. Augustine, Fla., and two-hospital Southeast Georgia Health System in Brunswick. Each entity retained its respective leadership and continues to operate independently, and the alliance is first focusing on wellness, patient education, chronic disease management and care coordination. "It's more about sustainability of community-based healthcare," he said.

The organizations Baptist partnered with had "dramatically low" health IT capabilities due to capital constraints, according to Mr. Greene. This is particularly problematic given the infrastructural demands of population health efforts. For instance, Flagler Hospital President and CEO Joe Gordy told a local Florida newspaper that the "huge overhead" attached to health IT could have robbed the whole system of savings if it did not take action to build greater scale. 

"We want to touch enough lives so the investments we're making in population health will make a difference."
At West Des Moines, Iowa-based UnityPoint Health, President and CEO William Leaver said consolidation is all about sustainability and caring for a broader population.

The 32-hospital system has a presence in nine geographic regions across Iowa, Illinois and Wisconsin. UnityPoint hasn't grown solely by expanding its provider footprint. It also moved into the payer realm in 2014 and made its debut in the Badger State by acquiring Madison, Wis.-based Meriter Health Services. The fully-integrated $775 million revenue system came with an acute care hospital, large physician group and managed care plan called Physicians Plus. The plan covers 65,000 members who live in south central Wisconsin.

More articles on hospital M&A:

2015 healthcare deal volume slows as end of year nears
12 recent hospital transactions and partnerships
25 hospital transactions and partnerships in November

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