The merger of large for-profit hospital chains did not improve profitability

The merger of large for-profit hospital chains did not improve profitability


New research shows that mergers between large, successful for-profit hospital chains have not produced significant gains in profitability or health outcomes.

According to peer review, as cost inflation exceeded revenue growth, the acquirer’s hospital profit margin fell by 3.3 percentage points analyze The 2007 merger involved more than 100 hospitals that tracked financial, management, and quality data for eight years. A work report issued by the National Bureau of Economic Research shows that although the combined system has improved their electronic medical records, the price of hospitals operated by the parent company has risen by 37%, and the impact on the quality of care is negligible.

“They are trying to change things, but what is surprising is that from the perspective of the parent company’s profits, these effects are either non-existent or negative,” said Raffaella Sadun, a professor of business administration at Harvard University. “The organizational costs associated with large mergers are usually much larger than predicted. We know this is the reason many mergers fail.”

The study found that most target hospitals have replaced their EMR with the EMR of the parent company. After the merger, there has been no meaningful change in the turnover rate and recruitment trend of doctors. However, the executives of the parent company often hold management positions in the target hospital and unify management practices in the merged organization. Nevertheless, these changes did not promote a statistically significant improvement in the operating margins of the target hospitals.

After the merger, the number of full-time staff in the parent company’s hospital has declined, while the capital investment in the target hospital has declined.

As for patient care, the mortality rate has hardly changed. The readmission rate of the target hospital decreased, and the readmission rate of the parent company increased slightly.

Martin Gaynor, a health economist and professor of health policy at Carnegie Mellon University, said: “This is another piece of evidence consistent with previous research that shows that decades of mergers have not produced substantial efficiency. Improve the evidence.” “If these mergers really reduce hospital costs, improve the quality of care or care coordination, we should have seen it by now. We are not saying that any hospital merger is problematic, but many of these markets are For one or two large systems, any further mergers may be very suspicious.”

The American Hospital Association stated in a statement that the conclusions based on a single, unrepresentative case study were too broad, and pointed out that the study did not mention relevant trends, such as the expansion of Medicaid, the implementation of the Affordable Care Act, or unpaid medical reimbursement reduce.

Hospital management staff claim This merger will help their organization become more efficient, thereby reducing costs, improving quality and increasing access to care.But in many cases, it is difficult for hospitals to integrate their organizations and fail to meet expectations. In most cases Research show.

In theory, hospitals should be able to use their market power to negotiate better prices and reduce related costs with equipment suppliers.

According to a report in 2018, horizontal hospitals merged into acquired hospitals save an average of US$176,000 per year, or 1.5%, which is far below the target set in the proposal work documents Researchers at the Wharton School of the University of Pennsylvania analyzed hospital supply purchase orders from 1,200 hospitals over a six-year period.

The adjacent system can maximize the negotiating influence of high-tech doctor preference items. But the researchers found that, overall, supplier concentration, downstream market power, or standardization did not produce significant savings.

Dr. Harry Greenspun, chief medical officer of the consulting firm Guidehouse, said: “A lot of integrations are not really cost-effective, nor have they fulfilled their promises in many areas.” “When the organization explores ways to integrate and does not integrate properly, it will start a step further. Review.”

Guidehouse found in its 2018 that scale is not always the way to get more profit analyze 104 highly rated health systems. The consulting firm’s research found that from 2015 to 2017, there was no correlation between higher revenue and better operating margins.

Hospital care accounts for nearly one-third of the US$3.8 trillion in healthcare bills and nearly one-fifth of the economy. Rising hospital costs, coupled with the fact that approximately 90% of the acute care market in metropolitan areas is highly concentrated, have led to more regulatory and congressional scrutiny.

President Joe Biden has push Strengthen the supervision of hospital integration. At the same time, there are countless federal and state bills that may increase the budget of antitrust enforcers and adjust monitoring procedures.

“From an antitrust perspective, the responsibility for proving that the merger is harmless to competition or consumers should be borne by the hospital,” Gaynor said, noting that the state attorney general has broader powers than federal agencies. “You might start asking the merging party about their management plan and whether they can achieve it.”

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