Will Hospital Mergers Ultimately Fail?

According to an expert speaking at the American Hospital Association’s annual meeting this past week, hospital and health system mergers are destined to fail. Hospitals and health systems typically partner to reduce costs and improve care, but many of the mergers that formed in the 1990s failed as organizations became too big.

According to the expert, history and studies show that the primary reason behind these partnerships-proving more care at less of cost-doesn’t actually work. Usually, mergers increase the cost of care; for partnerships that formed between 1989 and 1996, there was an average 40 percent price hike for partnerships for neighboring hospitals within seven miles. Prices were even higher for hospitals closer in proximity. Moreover, studies show that quality did not improve in 8 out of 11 mergers.

Common reasons for mergers include “declining reimbursements and volume; tight credit and a need to access capital for initiatives such as population health and physician acquisition; more leverage with payers; fear; and the pressure that ‘everyone else is doing it.'”

More recently, the Federal Trade Commission has been taking a harder stance against consolidations for market and pricing power.

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One thought on “Will Hospital Mergers Ultimately Fail?

  1. Pingback: Monday Morning Recap | hmsabc

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