hospital consolidation

What Hospital Consolidation Means for Consumers

The Manhattan Institute recently gathered health care industry executives and educational leaders to discuss hospital consolidation and its effects industrywide. “Race to the Top: How New York Can Better Encourage Value-Based Competition in Hospital Markets” focused on how competition can improve the quality of delivered care, and why consolidation increases overall health care costs. The question remains, “Are we chasing value or market share?”

Laurel Pickering, President and CEO, Northeast Business Group on Health, kicked off the conversation from a purchaser and employer perspective. “We know mergers and consolidations create higher costs,” she explained. “From the employer side, we’re all about market-based approaches — cost transparency, value-based benefit designs and reference based pricing.” These strategies help utilize consumer engagement and create efficient provider network strategies.

A recent study by Paul Howard, Director of Health Policy, Manhattan Institute, and Yevgeniy Feyman, Health Policy Fellow, Manhattan Institute, reports that since the Affordable Care Act passed, hospital mergers have jumped from 52 in 2009 to 100 in 2014. New York State alone has seen more than a dozen mergers since 2012. Both horizontal (one hospital merges with another) and vertical (a hospital buys a smaller practice and integrates it into its network) are occurring more frequently.

With the recent market changes, Dan Goldberg, panel moderator, POLITICO New York, asked, “Are we measuring value the right way?” According to Paul Howard, a one size fits all system is rapidly changing. “New York should implement a wide range of competitive reforms that focus on quality and lower costs for the consumer.”

Arthur Gianelli, President, Mount Sinai St. Luke’s noted, “The reality is that our system looks at its delivery platform every day to evaluate how we can deliver the highest possible quality.” He mentioned that through consolidation the industry will see different services offered at different hospitals. “Not every hospital does everything — if it does it lowers quality and efficiency,” Gianelli explained. He added, “We need to focus on a redistribution of care services that bind hospitals and providers together.”

With increasing consolidation and competition, health plans are responding with more value-based payment plans. “The solution to hospital consolidation is in many ways the path we’re already going down,” said Robert Hinckley, Chief Strategy Office, Capital District Physicians’ Health Plan. “It changes the dynamics so that these large hospital systems don’t gain market dominance in any one region — when two hospitals consolidate, value-based payment is the only solution.”

To learn more about the Manhattan Institute and its health care industry research visit manhattan-institute.org.