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Industry Report: Hospital Mergers Benefit Patients

A new report, funded by a for-profit hospital association, argues that hospital mergers, acquisitions and transactions offer "substantial benefits for patients and communities," such as greater efficiency and enhanced access.

The Federation of American Hospitals, which represents more than 1,100 investor-owned hospitals, commissioned FTI Consulting and its Center for Healthcare Economics and Policy to put the report together.

Analysts reviewed 75 studies and 36 primary sources to assess the state of hospital and healthcare consolidation. The report said since 1998, every year but one (2003) involved at least 50 hospital merger deals. The shift toward value-based and coordinated care has been cited as a major factor behind the rise in transactions.

Ultimately, the FAH report said the most recent literature suggests hospital mergers and integration deals benefit the populace. Larger systems are able to drive down costs through economies of scale, reduce overhead and other duplicative services and maintain hospital care in a community, according to the report. The alternative to mergers or acquisitions — which usually is hospital closures, downsizing or reduction in services — "can result in negative welfare effects for the local community."

Chip Kahn, president and CEO of FAH and a former lobbyist for the health insurance industry, said in a news release that "perceptions about hospital consolidation and pricing…miss the big picture," which is that healthcare spending in the U.S. has slowed down during the past several years. To counter this trend, realignment and mergers will keep hospitals afloat, he said.

However, many have argued a more concentrated hospital market, especially in smaller markets, will lead to local monopolies and consequently higher prices for consumers. In July 2012, the Robert Wood Johnson Foundation released a study saying exactly that — that when hospitals merge in already concentrated markets, price increases can often exceed 20 percent.

Barak Richman, JD, PhD, a healthcare economics, law and policy professor at the Duke University School of Law in Durham, N.C., has been a critic of hospital mergers. "I think the evidence is fairly overwhelming that concentrated hospital markets lead to much higher prices, and decreased competition leads to poorer quality," he said last year.

The FAH dismissed those studies and viewpoints, saying they are based on outdated data and are not representative of most transactions.

More Articles on Hospital Mergers and Acquisitions:
FTC Revises Hart-Scott-Rodino Premerger Filing Requirements
Glenview's Larry Robbins Was Key Player in Tenet-Vanguard Deal
The Most Influential Hospital Transactions of 2013

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