The healthcare industry has always pursued consolidation, along with projects to expand capacity, modernize infrastructure and meet rising patient demand. But in this moment of mounting financial pressure and industry headwinds, the judgment behind an organization’s growth strategy is more nuanced, and the financial room to act on it is not evenly shared.
So Becker’s put a question to a group of health system CEOs: When does getting bigger actually make a health system better, and when does it just make it bigger?
There are examples on both sides. Some systems are adding hospitals and pursuing capital projects worth $500 million or more. Others are redefining growth by getting smaller and more focused. Children’s Mercy in Kansas City, Mo., is building a $1 billion-plus acute care tower it frames as a capacity necessity rather than an expansion. Sharp HealthCare in San Diego is poised to add its 10th hospital through Measure H, which would authorize a 30-year lease agreement between Tri-City Medical Center and Sharp; the measure was receiving enough votes to pass as of the afternoon of June 3, with ballots still being counted. And some leaders have questioned whether bigger is automatically better, a case Meritus Health President and CEO Maulik Joshi, DrPH, made in a recent op-ed for Becker’s.
Four CEOs weighed in. Their answers converged on one idea, that scale is worth pursuing only when it is purposeful. They were split on how to define, measure and move toward scale.
Editor’s note: Responses have been lightly edited for clarity and length.
Dawn Bulgarella. CEO of UAB Health System (Birmingham, Ala.): Growth must be purposeful in order to support our mission to improve access to care, strengthen quality, support physicians and employees, and deliver the services and technologies that communities need. UAB Health System now includes 15 hospitals and more than 135 sites of care, and we view our purposeful growth as a way to reach more Alabamians with life-changing care. Our growth strategy has helped us ensure that more patients can receive the right level of care at the right time and place. We have structured our growth to preserve and enhance services for patients close to home while connecting them to the more complex care available at UAB Hospital, our academic medicine hub that is now the fifth-largest hospital in America and the longest-tenured and highest-volume American College of Surgeons level 1 trauma center in Alabama. Growing with this focus has strengthened our ability to preserve and improve the short- and long-term health of the communities we serve across the state and beyond.
Chris Howard. President and CEO of Sharp HealthCare (San Diego): I’ve always believed that one should not pursue scale simply for the sake of becoming larger. Meaningful scale is much more important.
We are not adding Tri-City Medical Center to say that we have 10 hospitals. We are adding it because Sharp HealthCare does not have a hospital in North San Diego County. Simply put, this affiliation extends the care we provide as a system to a part of our county that was previously out of reach. That’s a meaningful reason to grow.
What is value? It cannot simply be about growing revenue, as not all revenue is equal. It cannot be solely about diversifying a portfolio, because greater scale is not always accretive to profitability or success in a particular market. Meaningful scale must be defined by a combination of factors, such as improving healthcare for those served, bolstering the financial stability of all, enhancing quality, and otherwise serving as a win-win for all involved.
Maulik Joshi, DrPH. President and CEO of Meritus Health (Hagerstown, Md.): Scale clearly brings important benefits as it relates to efficiencies, such as purchasing power and leveraging human talent across a greater platform, among other benefits. A challenge, however, is that value is hard to measure and should be measured to see the full benefits of a health system getting bigger. We need to understand the impact on quality and community health as scale increases. The measures are harder to gauge, but focusing on that framework is critical so that we can better understand how a larger health system brings more value.
Alejandro Quiroga, MD. President and CEO of Children’s Mercy (Kansas City, Mo.): I don’t think bigger is better. I think rightsized is better. Where we are right now, we’re constantly at capacity, and we know we won’t be able to fulfill the needs of our community. When you’re in that position, and ideally a little bit ahead of it, which is where we are, that is the right time to be bigger. Not bigger for the sake of vanity or ego, but to provide the right care for the community. That’s the right type of bigger, and it’s obviously not always the type of bigger that the industry pursues. That’s how some of those issues have come about.
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