As we continue to fight the COVID-19 pandemic, a new surge of hospitalizations has swept the country leaving our already struggling hospitals to fend for themselves. American hospitals are the epicenter of our nation’s healthcare system; unfortunately, with rising costs and increased demands for care, hospitals must make tough decisions when it comes to investing in patient care, infrastructure, facilities, or research, which are all important hospital responsibilities.
Sadly, many hospitals have shuttered because they simply do not have the funds to continue operations.
In order to prevent the increasing number of closures, many hospitals and health systems are agreeing to acquisitions and mergers. This practice allows hospitals to fulfill their public safety mission to the communities they serve and preserve patients’ access to critical care while investing in expanding healthcare services and medical technology.
Hospital consolidation helps keep hospital doors open, guaranteeing patients’ ability to access the care they need.
In March 2018, Loyola Medicine in Chicago acquired MacNeal Hospital. In just one year, this acquisition increased MacNeal’s capital investment from $10 million to $30 million. This infusion of capital allowed MacNeal to improve and replace vital equipment and labs, renovate the inpatient nursing unit, upgrade technology, and much more. The minimum wage for all MacNeal employees was increased, and the acquisition dramatically improved the quality of care for MacNeal’s patients.
Regrettably, there are some very loud critics of hospital and health system mergers, including federal agencies who are reading dated research. A recent study by the Charles River Associates (CRA) showed conclusively “that recent hospital acquisitions reduce costs and lead to improved performance on important quality indicators without an increase in revenue that may signal enhanced market power.”
This is the third study CRA has done regarding hospital consolidation, and all three found that hospital acquisitions can generate substantial benefits. Acquisitions produce a 3.3 percent reduction in annual operation costs; this is typically a savings of $9.5 million per year. CRA also found that acquisitions are associated with a decrease of 3.7 percent in net patient revenue, which suggests that third-party payors, including commercial insurance plans, benefit from hospital consolidation.
Finally, with the immediate improvements made to acquired hospitals due to increased funds and stability associated with joining a health system, the study found that there is a significant reduction in inpatient readmission rates and a decline in mortality rates.
The American Hospital Association (AHA), sent this study with a letter to the Biden administration, including Health and Human Services Secretary Becerra, urging them to take a look at recent proof showing hospital consolidation benefits patients and the entire American healthcare system while insurance companies, one of the loudest critics of hospital mergers, are getting off scot-free for their own consolidation.
For-profit insurance companies who put their profit margin above patient care have bottom lines that directly conflict with the interests of patients and the healthcare professionals who treat them. What’s even more shameful, is the insurance marketplace is one of the most concentrated industry markets in the U.S. According to Axios in 2019, “Anthem, Cigna, CVS Health, Humana and UnitedHealth Group will control health insurance and pharmacy benefits for more than 125 million Americans.”
Over the last 11 years, the largest insurers in the United States have seen increased growth and held a firm grip on the insurance marketplace. During the same time period, premiums have skyrocketed, costs for providers have increased, and hospitals have shuttered left and right.
Federal agencies need to evaluate the new data regarding hospital consolidation before making grand pronouncements not backed by evidence. Hospitals are the lifelines of communities, and many times, mergers and acquisitions are the only feasible way for them to keep their doors open. Federal agencies should also investigate the consolidation happening in the condensed insurance industry.
Patients should always come first. In order to care for patients, we need hospitals to stay operational and we need patient care to be covered appropriately. Hospital consolidation is not hurting patients, it is saving lives, jobs, and communities.
