benefits of healthcare consolidation

For health care providers, consolidation is simply a logical business reaction to a multitude of economic and policy pressures that require new strategies for providers 33, No. With its diverse experience in many important industry trends and challenges such as crisis management, digitalization, or value-based healthcare, Olympus offers support and solutions to help healthcare organizations undergoing consolidation. Small hospitals often do not have the patient base to support specialist services such as oncology, cardiology, and orthopedic surgery. www.rwjf.org/content/dam/farm/reports/issue_briefs/2012/rwjf73261. Research shows that in the first three years under this regulation, total consumer benefits related to the medical loss ratioboth rebates to consumers when MLR thresholds were not met and savings from reduced overheadamounted to over $5 billion.34. To strengthen and lend credibility to these efforts, advocates can gather concerns regarding both pre- and post-merger activity from other community members, as well as study publicly available reports on market conduct, consumer complaints, pricing and service quality. Health Plans: 70% of metropolitan statistical areas (MSAs) are rated as highly concentrated, as reported by the American Medical Association. Vertical consolidation also occurs when physician practices enter into formal affiliation agreements with hospitals while maintaining their separate ownership structure. Merger review from an antitrust perspective is explicitly concerned with the potential increase in market leverage and pricing With the goal of minimizing price hikes and maximizing quality care through antitrust enforcement, the FTC aims to protect competition, which promotes lower prices, better quality and improved innovation. Globally, mergers and acquisitions are on the rise as countries attempt to navigate the ever-growing challenges faced by hospital organizations. Private equity firms have greatly increased their involvement in the healthcare system over the past two decades. The potential benefits, summarized in figure 1, typically include increased purchasing power, largely due to integrated budgets that are part of the consolidation process. 25, No. The combined Bellin Health and Gundersen Health would employ 14,000 people and run 11 hospitals and over 100 clinics across a four-state area. But the provision expires, bringing the maximum age back down to age 49 five Between 2002 and 2009, announced hospital mergers and acquisitions averaged 55 deals per year. . EHR adoption has In this period primary care doctors total compensation rose 4.41% to an average of $300,000, surgical specialists compensation rose 2.54% to around $520,000, other specialists grew by 2.36% to $415,000 and nurse practitioners and physician assistants increased by 3.7% to around $115,000, while the general inflation as measured Goldsmith, Jeff, et al.,Integrated Delivery Networks: In Search of Benefits and Market Effects, National Academy of Social Insurance, Washington, D.C. (February 2015). Likewise, hospital acquisitions of other entities such as community pharmacies, intermediate care facilities, and rehabilitation facilities jumped in 2015 and have stayed high in 2016 and 2017. Research shows consolidation in the private health insurance industry leads to premium increases, even though insurers with larger local market shares generally obtain lower prices from health care providers. The industry has consistently claimed that consolidation benefits consumers with lower prices and better care coordination, but the evidence shows the opposite has The Paterson (NJ) HRR has two hospitals, with one having 88% market share, and an HHI of 7,888 (very concentrated). Mergers involving smaller hospitals in local areas with other options may be less likely to incur antitrust reviews compared to larger hospitals or areas with fewer options; the latter can expect to be subject to more extensive review, perhaps lasting several months. PicewaterhouseCoopers LLP, The Massachusetts Experience: New Wave of Consolidation for Health Sector Post Reform (2013). More rigorous review of mergers before they are concluded, and increasing the public availability of data to enable closer study of the impact of these mergers, is critically important for ensuring appropriate future policies impacting healthcare quality and cost. Vertical consolidation within healthcare increased 25 percent from 2004 to 2011, with the most growth seen with hospitals buying or partnering with post-acute care facilities.1This kind of consolidation is often justified as a means to better coordinate care and improve healthcare quality.2As discussed below, reviews of this type of consolidation are mixed with respect to improvements in care coordination and quality, and any benefits must be balanced against the likely increase in market power. 10. With increasingly ageing populations, demographic shifts, and rising care costs, the pressure on hospital organizations has become overwhelming. Health Affairs 23.2 (2004): 175-181.Dafny, Leemore, "Estimation and Identification of Merger Effects: An Application to Hospital Mergers," 5 52.3 (2009): 523-550.Cooper, Zack, et al., The Price Aint Right? In fact, it may be that the rise in corporate This older study found hospital fixed costs could be as high as 84%: Roberts, Rebecca, et al., Distribution of Variable vs. However, research to date on completed hospital mergers has yet to demonstrate the benefits of consolidation via improved quality, access, and cost. (Photo: Shutterstock) Over the past several years, consolidation among hospitals has been drastically changing the health care landscape. McWilliams noted that rising hospital prices have been one of the leading drivers of unsustainable growth in U.S. health spending. Consolidation or alliances based on fear, urgency, or financial weaknesses can result in many challenges. Often these companies do business with each other or their services complement the other. Besides reducing administrative costs, a merger of two hospitals organizes patient care under a common operating model. This is largely because rural HRRs referral hospitals serve many small hospitals over an extensive geographic region, whereas urban HRRs referral hospitals are supported by fewer (and larger) hospitals in smaller geographic regions. 23. 12 Hayford, Tamara B., "The Impact of Hospital Mergers on Treatment Intensity and Health Outcomes," Health Services Research 47.3pt1 (2012): 1008-1029. In Europe, up to 1 in every 2 people with cancer symptoms has not been referred for diagnosis WebAfter the consolidation, insurance benefits for nearly 800 million rural residents got improved. Capps, Cory and David Dranove, Market Concentration of Hospitals, Bates White Economic Consulting (June 2011). Problems like burnout, administrative burden, and undervalued primary care are longstanding, deeply rooted issues. 7 Burns, Lawton R., and Mark V. Pauly, "Transformation of the Health Care Industry: Curb Your Enthusiasm?" quantity of care rather than the price of care. We use cookies on this site to enhance your user experience. The top ten airlines collected $35.2 billion in ancillary fees in 2018, up from just $1.2 billion in 2007. Providers work together through diverse organizational structures, yet evidence is limited regarding how to best organize the But the changes are pared down from the previously House-passed debt ceiling bill. Evidently, there is an urgent need for global healthcare systems to find new ways to deal with existing and future demands. The impact of the merger on two Nevada marketsLas Vegas and Renowas analyzed in depth. www.strategyand.pwc.com/media/file/Size-should-matter.pdf, 10 HFMA and Deloitte, Research: Hospital Mergers & Acquisitions, 2017, http://judiciary.house.gov/_cache/files/0a0e88c8-0519-4a47-8fa8-4c2233c760c3/greaney-testimony.pdf, 8. 29, No. In 2020, Olympus partnered with GM and Fairfield General Hospital, Bury, as part of the Greater Manchester Elective Recovery and Reform Programme, to provide a complete solution for a new endoscopy unit, helping to strengthen and recover endoscopy backlogs following the disruption caused by the pandemic. 13 Schmitt, Matt, "Do Hospital Mergers Reduce Costs?" Cuellar, Allison E., and Paul J. Gertler, Strategic Integration of Hospitals and Physicians,Journal Of Health Economics,Vol. www.hfma.org/mergers/, 11 Daly, Rich, Hospital Deals Accelerate in 2018, Problems like burnout, administrative burden, and undervalued primary care are Seehttps://www.healthcarevaluehub.org/advocate-resources/publications/health-insurance-rate-review/. A recent study found vertical integration due to suspended cancer screenings and a growing backlog of referrals. 30 announced transactions in the first quarter.3In 2007, approximately half (52.8%) of community hospitals belonged to a system; currently, two-thirds (66.8%) of community hospitals are in a system. These costs can include capital expenditures, property, utilities, facility maintenance, equipment, and staff salaries and benefits.9High fixed costs act as a driver for providers to expand horizontally, in order to spread those fixed cost across a greater volume of patients. Breed, Logan M., and David J. Michnal, Merger Remedies: The DOJs New Guide to Old Differences with the FTC,Antitrust Magazine(Spring 2005). 1 The year 2017 was a record one for merger and acquisition activity among hospitals and health systems, and this momentum is staying strong in 2018. The 2008 merger solidified the combined entitys position as the largest insurer within the state. While in France, Germany and the United States, over 60 per cent of hospitals are now part of a wider privatized healthcare network to help concentrate services, improve patient care, and leverage greater negotiating power Hospital mergers can lead to operating cost reductions for acquired hospitals of 15%30%. In fact, in the UAE alone there have been more than twelve healthcare mergers since 2015 as a result of large demographic shifts and a rising population The average benefit for retired workers is $1,827 a month in 2023. In 2014 alone, 90 mergers took place in the health care space nationally. A 65-year-old In addition to mergers, hospitals are also buying up provider practices. What is the impact of concentration in regional markets for hospital services on prices paid in workers compensation for hospital-based medical care after controlling for patient severity and hospital characteristics such as ownership, size, medical school affiliation, and wage variance. , while in the UK alone, it is estimated that there will be a 15.316.6 % increase in colorectal cancer deaths in the next five years Care in hospitals will likely become much more substantial capital investments.10 Because small independent hospitals have tight operating margins and limited access to capital markets, mergers into larger hospital networks How much do prices paid in workers compensation for hospital-based medical care vary for related diagnoses between different regional markets for hospital services? 2 By bundling services together and/or adding quality targets, it might be possible to mitigate some of the adverse effects of provider market power. Operating Costs in Hospital System,Medical Care Research and Review(April 22, 2015). http://www.ahipcoverage.com/wp-content/uploads/2011/06/ACOs-Cory-Capps-Hospital-Market-Consolidation-Final.pdf. While the rate of strategic M&As in Europe has slowed considerably as a result of COVID-19, the pace will gain momentum with smaller hospital organizations more likely to consider consolidation for financial reasons. Most healthcare consolidation occurs through mergers and acquisitions involving two companies that provide similar ranges of healthcare services. In the private insurance market (representing about 55 percent of all insured people), prices are set through a negotiating process.6The larger the entity and the fewer number of competitors, the more leverage the entity has over price negotiations. Reductions in hospital operating costs do not translate into price decreases. What are the benefits? In other cases, hospitals are sold between hospital systems, or similar hospitals may join in a merger of equals. As a result, many patients that would likely have been diagnosed previously at stage 1 or stage 2, are now being diagnosed at more advanced stages of the disease. Thats not surprising, given 18,600 doctors left independent practice and became employees of hospitals in 2019 and 2020. diseases, whereas workers compensation focuses on treatment of Vertical integration increases the costs of services for two reasons. Similarly, a market in which one hospital has a 40% share of admissions and six other hospitals have 10% each has an HHI of 2,200. The combined Bellin Health and Gundersen Health would employ 14,000 people and run 11 hospitals and over 100 clinics across a four-state area. For workers compensation, hospital consolidation is likely to affect both the quantity and price of medical services. A merger of companies producing services that are the same or close substitutes is a horizontal consolidation. You can view health plan concentration in your state at: http://kff.org/state-category/health-insurance-managed-care/insurance-market-competitiveness/, I. U.S. Department of Justice and the Federal Trade Commission, Horizontal Merger Guidelines (Aug. 19, 2010). Enter the product reference number (REF), which is located on the label of your Olympus Medical product into the search field and press "Search". The Herfindahl-Hirschmann Index (HHI) is used to measure levels of concentration within a market, with higher concentration levels meaning less competition. The bill would phase in higher age limits, bringing the maximum age to 54 by 2025. Rather, the purpose of the HHI is to draw attention to hospital markets and mergers in which competitiveness may be at risk because of high concentration among suppliers, and to signal the need for closer analysis. http://www.mass.gov/ago/docs/healthcare/2010-hcctd-full.pdf, 9. Reduced 33. 13. Theres also a higher likelihood of retirees needing medical care as they grow older. Table 1 summarizes the findings of three recent studies. The Healthcare Value Hub can help you find free, timely information about policies and practices to achieve health systems that are equitable, affordable, and focused on the goals and needs of the people the system is meant to serve. The most commonly cited reasons include the desire to gain negotiating power, to offset fixed costs and to navigate the uncertainty surrounding the future of healthcare. Instead of cost savings, most experts believe price increases occur as a result of the increase in market power and the commensurate decrease in competition. Perhaps it is time we detached work from health benefits altogether and created plans that better reflect the needs of our population and how medicine is 24. For illustration, New Mexico is a large rural state that is primarily served by the Albuquerque HRR. The federal McCarran-Ferguson Act of 1945 generally preempts federal law applying to the business of insurance with state law, and exempts the conduct of the business of insurance from federal antitrust law wherever it is regulated by state law. The Milbank Quarterly 96.1 (2018): 57-109. Recent research shows that hospital concentration increases prices paid by commercial insurers. As shown in Figure 2, the Albuquerque HRR extends into northeastern Arizona and southwestern Colorado. The Houston (TX) HRR has 65 hospitals and an HHI of 394 (very unconcentrated). 1, No. WebPotential advantages of health system consolidation and integration. Consolidation is a major cost driver within the U.S. healthcare system. Examples of healthcare consolidation in EMEA. By submitting this webform you agree to receiving marketing communication, as outlined in our. Understanding the changing environment in Healthcare and its impact on the economic, efficiency, reputational, and safety related matters of your Hospital Organizations. Moreover, once these mergers are concluded, they cannot generally be unwound, so consumers must live with the impacts for a very long time. 6. When hospitals own provider practices, the hospital can charge a facility fee in addition to the providers professional reimbursement. , in the UK, Greater Manchester has seen significant success with the operational merger of several NHS trusts. Typically, medical prices grow faster than other consumer costs. Misconception #2: Corporate ownership exacerbates physician burnout. Healthcare Value Hub,A Primer: How Antitrust Law Affects Competition in the Healthcare Marketplace, Research Brief No. Hospitals are consistently under the spotlight when it comes to improving efficiencies to decrease healthcare costs and improve patient care. . 18. 310, No. power, not about the reduction in the number of competitors An important motivation for consolidation is to increase negotiating power in insurer-provider contracting. Emmons, David, W., Jose, R. Guardado and Carol K. Kane, Competition in Health Insurance: A Comprehensive Study of U.S. Markets, 2015 Update, American Medical Association (2015). Hospital Referral Region (HRR) is a popular geographic specification for regional hospital markets. The HHI was calculated by share of total hospital beds for general medical and surgical hospitals. The most likely harm to competition and consumers comes when the consolidation is between two companies operating in the same local service area. In a typical regional market, small hospitals serve as referral sources to large urban hospitals that provide an array of specialties. And, how can adopting a collaborative approach, with a MedTech company like Olympus, help to streamline and support the consolidation process? One study suggests that innovation in terms of new work flows and improved cost controls is most common among hospitals that face some financial pressurein other words, those with more limited market leverage and lower operating margins.21On the other hand, another study suggests that innovation, in the sense of adopting advanced technology, is primarily associated with higher hospital operating margins.22In cases of consolidation, if an entity is already considered top quality and in high demand by patients, it has little incentive to innovate its internal processes. Every American deserves high-quality, affordable health care. The trend for healthcare consolidation is not limited to the UK. Reviews by the FTC, the Department of Justice (DOJ), the state attorneys general (AG), and sometimes the state insurance commissioners examine proposed mergers to see if they are anti-competitive or, in the case of the insurance commissioners, contrary to the public interest.27These processes provide avenues for advocates to weigh in, and in the case of state insurance commission reviews, there is often an opportunity for providing input into a public hearing record. The fundamental appeal of consolidation is the ability to unlock value through efficiency, which benefits patients, physicians, payers and investors alike. 52, No. Healthcare consolidation improves integration of care and reduces duplication of clinical services. Individuals with more underlying chronic health conditions were more likely to delay or avoid medical care OAKLAND, Calif. , May 26, 2023 /PRNewswire/ -- At the height of the pandemic, individuals were asked to delay preventive care and elective procedures to alleviate incidences of community transmission. Collaborating with an established MedTech company, like Olympus, may alleviate many of the pressures faced by healthcare organizations. Compensation mechanisms for ACOs require that the ACO bear risk for patient or population outcomes, as opposed to receiving fees for service. Our research, which included both structured interviews with hospital leaders and econometric analysis, found that hospital acquisitions can generate substantial benefits. In addition, improvements in quality of care are possible through enhanced care coordination and sustained capital investment to expand clinical services. The HHI for a monopoly market with only one hospital is 10,000 (= 100 x 100). Currently, reimbursement rates for medical goods and services are determined by provider-insurer negotiations often using a fee-for-service platform. Rural HRRs tend to be much larger and less concentrated than urban HRRs. Birkmeyer, John D., et al., Surgeon Volume and Operative Mortality in the United States,New England Journal of Medicine(November 2003). Burns, Lawton Robert, et al., Is the System Really the Solution? A federal law exempting the conduct of the business of insurance markets from most federal law, including antitrust law, where there is state regulation. Physicians do not compete with hospitals, but rather they provide services that are inputs to a hospitals production of healthcare. 2. Potential Benefits of Healthcare Consolidation. Click here to download Research Brief No. But consolidations over broader geographic areas can also be potentially harmful to healthcare and deserve close scrutiny.4, It is important to note that there are differentdegrees of integrationor affiliation that companies may adopt. In 2005, approximately 50% of physicians practiced in a physician office; by 2015, only 40% of physicians are office-based. Hospital rate setting is a rarely used payment approach in which a central body establishes uniform rates for hospital services for multiple payers (insurers). Figure 1: Healthcare consolidation: The potential benefits of healthcare consolidation can have a positive impact on patients, clinical and non-clinical staff alike. cost reductions of 15% to 30%9 from economies of scale. The majority of merger and acquisition activity involves consolidation of individual hospitals into a hospital system. improves 30-day mortality. 32. By contrast, if you claim Social Security later than full retirement age, your spouse's survivor benefits will be based on the increased benefit your delayed claim entitled you to. 18 (November 2013). Consolidation in healthcare includes mergers, acquisitions, affiliation agreements, and facility closures. These remedies can include structural remedies, such as divestitures, and conduct remedies, such as caps on insurance rates or requirements to grant access to other companies or consumers. Healthcare Value Hub,Hospital Rate Setting: Promising, but Challenging to Replicate, Research Brief No. These financial incentives are driving the movement toward both horizontal and vertical consolidation among healthcare providers and changing market structure for the delivery of healthcare services. Hall,Realizing Health Reforms Potential: The Federal Medical Loss Ratio Rule: Implications for Consumers in Year 3, The Commonwealth Fund (March 2015). WebThe purported benefits of cross-market mergers are similar to those of traditional within-market hospital consolidation. A 2012 review of studies using American and English data found that competition At the time, UnitedHealthcare had the largest market share and Sierra ranked third. 34. This is a huge concern around the world that places significant stress on patients, as well as an additional financial burden on healthcare systems. But what is healthcare consolidation? Mergers among hospitals and other providers have garnered increased scrutiny from the FTC since the boom of consolidations in the 1990s. 2 In our interviews, the leaders of systems identified several mechanisms through which acquisitions may reduce costs, including by increasing hospital scale, standardizing In this report we revisit our econometric analysis and include two additional years of data for 2018 and 2019 on cost, quality, and revenue outcomes from hospital 2000 M Street, NWSuite 400 Washington, D.C. 20036 202.828.5100 p 202.728.9469 f, American Economic Journal: Economic Policy, Integration, Concentration, and Competition in the Provider Marketplace, Integrated Delivery Networks: In Search of Benefits and Market Effects, Snapshots: How Changes in Medical Technology Affect Healthcare Costs, Competition and Choice in the Health Insurance Marketplaces 2014-2015: Impact on Premiums, A Primer: How Antitrust Law Affects Competition in the Healthcare Marketplace, Dont Leave It to the States: Leaving Health Insurance Oversight to State Regulators is a Dangerous Idea, Congress Begins With Renewed Efforts to Repeal Insurers Antitrust Exemption, Realizing Health Reforms Potential: The Federal Medical Loss Ratio Rule: Implications for Consumers in Year 3, Hospital Rate Setting: Promising, but Challenging to Replicate, Insufficient Quality for Our Healthcare Dollar, http://kff.org/state-category/health-insurance-managed-care/insurance-market-competitiveness, http://www.ahipcoverage.com/wp-content/uploads/2011/06/ACOs-Cory-Capps-Hospital-Market-Consolidation-Final.pdf, http://kff.org/other/state-indicator/total-population/, http://judiciary.house.gov/_cache/files/0a0e88c8-0519-4a47-8fa8-4c2233c760c3/greaney-testimony.pdf, http://www.mass.gov/ago/docs/healthcare/2010-hcctd-full.pdf, http://www.fiercehealthcare.com/story/hospitals-fixed-costs-drive-healthcare-expenditures/2013-10-07, http://www.ca6.uscourts.gov/opinions.pdf/14a0083p-06.pdf, https://www.healthcarevaluehub.org/advocate-resources/publications/health-insurance-rate-review/, Moderately Concentrated (Moderately Competitive). Hospital mergers can lead to quantity of care, and increase prices. Several different factors seem to be driving recent consolidation in the healthcare marketplace. All three studies focused primarily or exclusively on 10. Further, the variability with which rate review authority exists among the states, and whether it is carried out assertively, means that consumers in some states must bear the full consequences of mergers while those in neighboring states have access to some relief from their regulators. In the Houston HRR, if any two hospitals merged, the HRR would still be considered competitive; but this is not true for the Paterson HRR. By combining former competitors in a market, consolidation has the potential to reduce competition, affect the Hospitals have long argued that mergers and acquisitions enable better care coordination across facilities, standardization of best clinical practices, and operational efficiencies from economies of scale. injuries. US Department of Justice Horizontal Merger Guidelines, a market with an HHI of: The HHI is a useful indicator to assess the extent of market concentration in an existing market, as well the change in market concentration from a proposed merger. However, history tells us that powerful market players can find ways to continue to wield their power to their advantage even under increasingly strong regulatory regimes. Increased care coordination. We are now experiencing a second wave of healthcare consolidation that started around 2010. Misconception #2: Corporate ownership exacerbates physician burnout. Specifically, the combination of companies that formerly dealt with or competed with each other, or that potentially could have. Theres also a higher likelihood of retirees needing medical care as they grow older. 6 (2009). With consolidationboth horizontal (hospitals acquiring other hospitals) and Network participation by community hospitals has increased from 31% to 35% over the same period.4, Increased vertical consolidation has changed where physicians practice. The share of hospitals affiliated with health systems increased To improve reimbursement under MACRA, providers are increasingly joining large group and hospital-owned practices. 1. The HRR concept was developed by the Dartmouth Atlas from Medicare data in order to capture referral patterns in primary, secondary, and tertiary care. For example, including more physicians into a single health system may be a strategy to ensure a steady stream of patients through self-referrals and the opportunity to spread fixed costs. Among the factors considered in defining a regional hospital market are distance between hospitals, clinical capabilities, population size, and local legal restrictions. Typically, medical prices grow faster than other consumer costs. Dafny, Leemore, Duggan, Mark and Subramaniam Ramanarayanan, Paying a Premium on Your Premium? Despite the significant impact on consumers, advocates have a limited tool set, and access to limited data, to scrutinize the potential impact of consolidations and help prevent harm. Both studies defined the relevant hospital market by metropolitan statistical area. The geographic size of an HRR and the distribution of hospitals in it are key elements in assessing the markets competitiveness and the potential impacts of consolidation. A growing need for consolidation in healthcare. Since then, 2017 was a Over decades of practice, US antitrust authorities have developed a systematic way of thinking about the competitive effects of market consolidation, as well as some specific guidelines for answering the questions posed above. The With a growing backlog of patients waiting to be diagnosed and treated, in addition to COVID-19 patients, hospitals are increasingly finding new and innovative ways to alleviate the burden of backlogs and improve patient outcomes, increase efficiencies, and relieve economic pressure. Last month, Michigan's two largest hospital systems, Spectrum Health and Beaumont Health, announced they wanted to become one. Improving quality measures is more difficult for solo and small provider practices. The Benefits of a Value-Based Care Healthcare Delivery Model By HCDI Communications Value-based care is a relatively new healthcare delivery model focused on the quality of care to improve patient outcomes and reduce costs while the fee-for-service model focuses on the quantity of care. 8 Rate setting still involves some negotiation with hospitals, but with all payers acting as combined entity governed by a public body. During those years, proponents of consolidation have argued that physicians and hospitals working together in integrated, coordinated systems would not only provide better care for patients, but would do so more efficiently than independent physician practices and hospitals, driving quality of care up while holding spending steady and even WebHealth systems will likely be confronted with significantly lower revenue and decisions about where care can and should be delivered. To examine the impact of hospital mergers on quality of care, researchers from HMS and Harvard Business School examined patient outcomes from nearly 250 hospital mergers that took place between 2009 and III. Researchers found premiums rose due to merger in these markets.25, Further, some research suggests that prices increase more steeply when the consolidated entity is a fully integrated provider, compared to when the merged entity exhibits a lower level of integration.11Moreover, when hospitals merge in markets that are already concentrated, the price increase can be significantin merged companies and non-merged rival companies as well.12In 2013, the Federal Trade Commission (FTC) prevented the merger of two Ohio hospitals citing the price variation that existed between providersthe largest entity maintained prices of 32-74 percent higher than other area providers.13, Consolidations within a local market area are more likely to create an excessive concentration of providers, and can lead to higher prices and lower healthcare value for consumers. Merging companies often tout benefits including cost savings and increased care coordination, but serious concerns about market power also need to be raised. Research such as Cooper et al., shows that hospital concentration increases the cost of care for Medicare fee-for-service (FFS), but in contrast to commercial insurance, this occurs by increasing the The result is multiple negotiations and a wide variety of prices in the marketplace. Further, the report found that price variations are not correlated to (1) quality of care, (2) the sickness of the population served or complexity of the services provided, (3) the extent to which a provider cares for a large portion of patients on Medicare or Medicaid, or (4) whether a provider is an academic teaching or research facility. A hospital with integrated rehabilitation would likely begin physical and occupational therapy during the initial hospital stay and then coordinate with outpatient rehabilitation. The product monograph can be accessed through Health Canada's Drug Product Database or by contacting Hikma Canada Limited at 1-800-656-0793. Providers have financial incentives to consolidate into entities capable of providing integrated care. A typical argument in favor of hospital consolidation is that efficiency improvements will result from economies of scale and eliminate redundant services. Could healthcare consolidation, combined with alternative strategies, be part of the answer? Perhaps it is time we detached work from health benefits altogether and created plans that better reflect the needs of our population and how medicine is practiced in 2023, not 1963. Horizontal consolidationjoins two similar companies, such as two hospitals or two insurers. Vertical consolidationor integration, occurs between companies in different lines of work. Baker, Laurence C., et al., Vertical integration: Hospital ownership of physician practices is associated with higher prices and spending,Health Affairs, Vol. Neprash, Hannah T., et al., Association of Financial Integration Between Physicians and Hospitals with Commercial Healthcare Prices,JAMAInternal Medicine(October 2015). It is likely that the price of inpatient services for workers compensation is higher in highly concentrated markets and, like Medicare, that higher quantities of medical services are provided. 18 Capps, Cory, David Dranove, and Christopher Ody, "The Effect of Hospital Acquisitions of Physician Practices on Prices and Spending," 5 59 (2018): 139-152. Consolidation in the U.S. Health Insurance Industry,American Economic Review, Vol. permit merging facilities to lower their costs through economies of scale, improve quality of care Please turn on JavaScript and try again. December 15, 2020 - The top ten largest health systems now control nearly a quarter market share because of rapid health system consolidation and this trend is likely With finances dwindling and thousands of elective procedures postponed over the course of the last year, how can hospital organizations be expected to manage? power for the merged hospital system. According to the centers for Medicare and Medicaid Services (CMS), national health spending was $4.2 trillion in 2020, which represents 17.7% of the gross domestic product (GDP). Even so, the trend toward increasing hospital consolidation is likely to have produced similar upward pressures on utilization and price in workers compensation as those observed for other types of health insurance. Once completed, the combined hospital system will be the second largest healthcare system in Massachusetts, controlling nearly one-half of admissions in the state. 28. While techniques such as reference pricing, bundled payments, and pay for performance can be useful tools, these strategies alone cannot be relied on to prevent potential abuses after consolidation. Hospital Prices and Health Spending on the Privately Insured, Health Care Pricing Project, 2015. 1011-1015. As the COVID-19 pandemic took hold of the world and the number of patients requiring imminent help increased, hospitals understandably struggled to continue regular patient services such as elective cancer screening appointments and referrals for cancer diagnostics. This is usually done to improve on the services offered to their clients and at the same time to cut on the costs. Consolidation refers to when two or more companies combine. 15. per se. Affordable Care Act (ACA), the Medicare Access and CHIP Reauthorization Act (MACRA), and changing financial models.7 The ACA increased incentives to move patient care from an inpatient to an outpatient setting, motivating hospital systems to acquire physician practices in order to capitalize on increased outpatient revenues and secure referrals for hospital-based services. National Law Review,Congress Begins With Renewed Efforts to Repeal Insurers Antitrust Exemption(March 3, 2015). Today, health care is unaffordable for too many families. This tool utilizes several metrics, including HHI scores, prices and utilization records to score the economic performance of a number of healthcare markets. The case of Olympus and Greater Manchester collaborating for consolidation. How much of an incremental impact on competition is the proposed acquisition likely to haveespecially on the power of the merged entity to influence utilization and pricing? 1 (January 2006). Bruce Feinberg, DO: Rapid fire, secondly: What are the potential benefits? 12. Each HRR must have a tertiary referral hospital for major procedures such as cardiovascular and neurosurgical surgery. improves integration of care and reduces duplication of clinical services. Published Aug 26, 2021 by AHIP. But the changes are pared down from the previously House-passed debt ceiling bill. Webp41: the risks and benefits of healthcare consolidation on innovation and clinical research in health systems and hospitals conducting due diligence and the compliance risk mitigation strategies to help you sleep at night hcca compliance institute boston, ma april 7, 2019 cynthia hahn emmelyn kim, ma, mph, ccra, chrc This provides a lower bound of hospital merger activitythe Kaufman Hall data cited above contains some transactions involving specialty hospitals not included in Figure 1, but the patterns are very similar. . record year with 115 announced deals2 and 2018 has started at an even stronger pace with 7 (Feb. 17, 1999). Although there is no research focused specifically on the impact on providers innovation as the result of health plan mergers, a large-scale merger in 1999 between Aetna and Prudential impacted 139 geographic markets in the U.S. resulted in decreased physician salary growth and employment and an increase in nurse employment and salary growth, compared to areas not impacted by the mergers.26, Industry entities often cite the Affordable Care Act (ACA) as a primary driver of consolidation, although industry experts are divided. improves access and mortality.14 A study on the effects of six medical conditions in California found that increased competition WebJune 2016Consolidation among hospitals and laboratories can sometimes seem like too massive a tide for independent and hospital-based laboratories to effectively resist. Retirees The government is scheduled to pay $25 billion in Social Security benefits on June 2 one of several big payments the program will make over the course of the month. Hospitals and other providers in a region have naturally existing referral patterns for primary, acute, and specialty medical care. It looks like your browser does not have JavaScript enabled. But the changes are pared down from the previously House-passed debt ceiling bill. There are several metropolitan areas in New Mexico that serve as cardiovascular referral centers, but only Albuquerque has the capacity for major neurosurgical procedures. In fact, it may be that the rise in corporate Ricciardiello L, Ferrari C, Cameletti M, Gaianill F, Buttitta F, Bazzoli F, Luigi de'Angelis G, Malesci A, Laghi L. Maringe, C, Spicer, J, Morris, N, Purushotham, A, Nolte, E, Sullivan, R, Rachet, B, Aggarwal, A. Nolte, E, Pitchforth, E, Miani, C, Mc Hugh, S. Efficient Investment in Surgical Energy Equipment, Tameside and Glossop Integrated Care NHS Foundation Trust, Manchester University NHS Foundation Trust, Wrightington, Wigan and Leigh NHS Foundation Trust. In 2000, 30% of HRRs had an HHI greater than 2,500, but by 2017 44% of HRRs were above this level. cost savings through efficiencies and, sometimes, via a supposed balancing of market power. Antitrust Efforts to Limit Consolidation and Promote Competition. This site is intended for residents of the European Union, Russia, Middle East, and Africa only. 3 5 Forlines, Grayson L., "Trends and Drivers of Physician-Hospital Integration: The Role of Medicare Reimbursement," 2017. The ACA encouraged the formation of Accountable Care Organizations (ACO) in the Medicare program.8 ACOs are groups of doctors, hospitals, and other healthcare providers that come together voluntarily to give coordinated high-quality care to their Medicare patients. By Further, HHS is tasked with reviewing proposed rates for states that fail to qualify as having an effective rate review program. One notable example is the merger of Beth Israel Deaconess Medical Center, Lahey Health, and several other hospital systems, which was approved by the Massachusetts Public Health Council in April 2018. Balto, David, and Stephanie Gross,Dont Leave It to the States: Leaving Health Insurance Oversight to State Regulators is a Dangerous Idea, Center for American Progress (Oct. 22,2009). Individuals with more underlying chronic health conditions were more likely to delay or avoid medical care OAKLAND, Calif. , May 26, 2023 /PRNewswire/ -- At the height of the pandemic, individuals were asked to delay preventive care and elective procedures to alleviate incidences of community transmission. At the time it was predicted that over the next five years, 20% of the industry would assess consolidation. For more information, see:http://www.ca6.uscourts.gov/opinions.pdf/14a0083p-06.pdf. Consolidation can be vertical or horizontal. Consolidation is taking place throughout the healthcare system at an increasing rate. Using this rubric, many health plan and hospital markets in the U.S. are highly concentrated. 28, No. However, Medicare FFS patients in more concentrated hospital markets do receive more services than those in less concentrated markets. Annual counts of acquisitions of hospitals and hospital systems have increased moderately since the 1990s, subject to fluctuations. As of 2013, 60 percent of hospitals were part of a larger health system, compared to 53 percent in the 1990s.3As discussed below, this type of consolidation is closely scrutinized by regulators because of the potential loss of market competition and associated consumer harms. Narrow Networks/Tiered-Provider Networks/Selective Contracting. The onset of a global pandemic only served to amplify the normal pressures faced by healthcare providers; staff shortages, limited access to resources, and increasing costs all place significant strain on hospital organizations. Several efforts have been attempted over the years to repeal this antiquated antitrust exemption for insurance companies those efforts have been strenuously opposed by the insurance industry.32. See Leemore Dafny, testimony before Senate Committee on the Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights (Sept. 22, 2015). Stensland, Jeffrey, Zachary R. Gaumer and Mark E. Miller, Private-Payer Profits Can Induce Negative Medicare Margins,Health Affairs,Vol. In addition, at least 35 states have adopted hospital fee schedules for workers compensation. 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