How Do Healthcare Mergers and Acquisitions Impact Patients?

August 07, 2018 - Healthcare mergers and acquisitions have been the cause of considerable debate across the medical industry, calling into question the tools and scale necessary to thrive in current care models as well as the notion of anti-trust laws in healthcare. But as industry professionals consider the business case for mergers and acquisitions, it will be essential for them to also understand how these events impact the patient experience.

Healthcare mergers and acquisitions are on the rise, according to recent data from Kaufman Hall. In 2017, there were 13 percent more healthcare mergers than in the year previous, Kaufman Hall reported.

A separate analysis from PricewaterhouseCoopers revealed that there were 255 healthcare merger and acquisition deals in Q2 of 2018.

And with the increase in healthcare mergers has come an increase in debate on the matter.

Industry professionals are at odds about the anti-competitive nature of healthcare mergers and acquisitions. In theory, when there are fewer independent providers, there are fewer choices for healthcare consumers. A healthcare monopoly could lead to cost issues and care access issues.

READ MORE: What Providers Should Know to Improve Patient Access to Healthcare

But proponents of healthcare mergers and acquisitions say these structure changes are essential to survive in the shifting industry landscape. Mergers and acquisitions make it so patients can access quality care all across the country and keep a cap on spending.

Below, PatientEngagementHIT.com discusses healthcare mergers and acquisitions and their impact on the patient experience, specifically on the cost of care and care quality.

Changes in out-of-pocket costs

One of the biggest arguments in the healthcare merger debate surrounds healthcare costs. Supporters of healthcare mergers claim that structural changes can lower healthcare costs, which in turn could lower patient expenses.

A hospital merger would increase access to capital and other resources for many healthcare organizations, which would in turn improve costs for patients, according to a 2017 report from the American Hospital Association (AHA).

“These include a combination of back-office functions such as supply chain, general operations, revenue cycle management, as well as the ability to spread the substantial costs associated with development and operation of the IT systems necessary to support value-based payment initiatives,” AHA wrote. “In addition, planned consolidation of some clinical service lines at one or another hospital campus can demonstrate commitment to cost reduction and quality enhancement.”

Between 2009 and 2014, healthcare mergers and acquisitions led to a cost reduction of 2.5 percent, or nearly $5.8 million, the AHA report showed.

However, consolidation of healthcare organizations can create limited competition. Foremost, this creates more bargaining power for healthcare organizations when negotiating with health payers, according to Gregory Curfman, MD, assistant professor of medicine at Harvard Medical School.

“When individual hospitals merge into larger systems, they gain a larger share of the consumer health market,” Curfman wrote in a post about hospital mergers. “That puts them in a position to ask health insurance companies to pay more for medical care and procedures. These higher prices are not borne by the insurers, but by consumers in the form of greater premiums. Thus, some economists argue, mergers drive up health care costs and place added financial pressure on consumers.”

Anti-competition also opens the door for a large health system to set high prices for their services, which can result in higher out-of-pocket costs for patients, according to Health Professionals and Allied Employees (HPAE), a New Jersey-based nurse union.

“The arguments against hospital mergers focus on consumer (patient) costs increasing when there is a dearth of competition: when the same hospital system controls the majority of care in any given area, that system also controls what it charges for services when there is no other system to vie for patients,” HPAE said in a resource on hospital mergers. “The reasoning is that more providers make for greater competition and therefore lower prices.”

Impact on patient care quality, access

Hospital mergers and acquisitions can also have an impact on patient care quality and patient care access.

In many cases, hospital acquisitions or mergers occur when a small, independent hospital or clinic would not longer be able to operate on its own. A larger organization purchases the smaller provider, thus enabling it to continue operation. Had the acquisition not occurred, patients served by the smaller provider may have lost care access.

Generally, hospital mergers are happening because it is easier to face the challenges of the current healthcare landscape with more manpower and resources, according to 2016 testimony from Paul B. Ginsberg of the Brookings Institute.

“The trend is accelerating for reasons that are apparent,” Ginsberg said. “For providers, it is becoming an increasingly challenging environment to be a small hospital or medical practice. There is more pressure on payment rates. New contracting models, such as Accountable Care Organizations (ACOs), tend to require more scale. The system is going through a challenging transition to electronic medical records, which is expensive and requires specialized expertise to avoid pitfalls. Lifestyle choices by younger physicians lead them to pursue employment in large organizations rather than solo ownerships or partnerships in small practices.”

None of that is to say there are not downfalls to hospital mergers and acquisitions, Ginsberg continued. Mergers and acquisitions limit competition, which means patients must access care on the terms of one healthcare industry giant. Actions must be made to regulate that industry consolidation to protect patient care access, Ginsberg argued in his testimony.

Proponents of healthcare mergers also state that these industry shifts have a positive impact on care quality.

When two entities merge, they more than likely streamline certain protocols, which can lead to enhancements and standards of quality care. Furthermore, mergers can reduce the occurrence of low-volume surgeries, or the practice of patients undergoing a procedure at an organization with limited experience in that area, according to a 2016 NEJM Catalyst article.

Researchers have found that patients fare worse when they receive low-volume surgery, but combining the forces of multiple providers can reduce the instances of this. Additionally, larger health systems can enforce reasonable minimums for surgical procedures, the article stated.

Conversely, some experts have argued that hospital mergers lead to a decrease in care quality because more patients are accessing a service and the scope of the practice is too wide. A 2018 JAMA report found that healthcare consolidation increased the risk of adverse patient safety events.

“Teams with little expertise in patient safety are typically responsible for implementing healthcare mergers, acquisitions, and affiliations,” wrote report authors Susan Haas, MD, MSc, Atul Gawande, MD, MPH, and Mark E. Reynolds. “Their primary impetus is often financial rather than clinical, and when the impetus is clinical, the concerns usually involve patient access and services rather than the way care is practiced in the affected institutions. Goals and responsibility for safety and quality are frequently unclear.”

The debate of the pros and cons of healthcare mergers is ongoing. However, the current healthcare landscape indicates that these mergers will continue. As healthcare executives continue their mergers and acquisitions, it will be essential that they consider the impact on patients and design deals that will not harm the patient.