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April 18, 2017

Mixed Outcomes for Healthcare Consolidation

In many industries, corporate consolidation is championed for increased efficiency and revenue. But, as a wave of consolidation has hit healthcare, it’s been met with mixed outcomes.

With healthcare M&A activity reaching new highs in 2015, it is clear the industry is in the midst of widespread transformation and conglomeration. A 2016 Modern Healthcare survey found that nearly 80% of healthcare CEOs believe the rate of consolidation will remain consistent or accelerate in the coming years.   

There are a number of factors contributing to the rapidly-consolidating provider industry, including: 
  • A decreasing number of independent physicians.
  • More and more physicians employed by a hospital or large physician practice. In fact, the number of physicians in practices of 100 or more has jumped from 12 to 20 percent in the past four years.
  • Hospitals are adding independent physicians, as well as independent hospitals, to grow their networks and expand into additional markets.

The race to consolidate and its impact on providers and patients has brought about new opportunities, as well as challenges.

Provider consolidation can be good for patients, as it sets the stage for more coordinated care. As a result of consolidation, a patient could see their primary provider, get a referral for an MRI, have the test performed, and visit a hospital for surgery, all within the same health network. 

Additionally, consolidation should allow providers to improve care quality by drawing on the resources of big systems, giving them scale to invest in technology and other tools to improve services. And as patient populations grow, the size and scope that consolidation brings can help address patient needs more efficiently.

A look at the other side of consolidation, however, tells a different story. This starts with competition; typically, in any industry, competition leads to lower prices. And, as healthcare companies continue to merge, providers with less competition may have less motivation to deliver better services at a lower cost.

Apparently, the government agrees. Recently, the Federal Trade Commission delayed a merger between Advocate Health Care and NorthShore University HealthSystem, citing that the deal would harm competition, leading to higher prices for patients.

Less competition may also lead to sacrificed quality, as there are fewer practices to outperform. A study published in Health Affairs revealed that physician-owned practices prevent more avoidable readmissions than practices owned by hospitals. 

The trend of consolidation is here to stay, and so is the debate about its impact. Throughout the industry, there will be a challenge to achieve and maintain high value from consolidation by enhancing quality and lowering the costs of care. But, different models of consolidation and clinical integration can help organizations successfully navigate their alliances. As long as consolidation in healthcare helps providers deliver more coordinated and better quality care, we can expect to see new partnerships continue to form across the industry. 

Tagged: Interoperability, Care Coordination, healthcare consolidation

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