Hospitals continue consolidating despite the pandemic

The pandemic has dried up big parts of hospitals’ businesses, and that’s why Congress established a $175 billion bailout fund to help them. At the same time, they’re spending millions on lawyers and advisers to explore deals that expand their business empires.

When a merger or acquisition occurs in healthcare, the conjoining providers often say that patient experience will benefit as a result. But new findings published in the New England Journal of Medicine suggests that may not be the case.

In fact, the study found just the opposite: Acquired hospitals actually actually saw a patient experience that was moderately worse, on average. What’s more, 30-day mortality and readmission rates stayed largely the same at such facilities.

The only real improvement that was found among the majority of acquired entities was in the realm of clinical process, which improved modestly. But the improvement was so incremental that it couldn’t be linked to the actual acquisition, and prices for commercially insured patients tended to be higher.

The research looked at 250 hospitals acquired in deals between 2009 and 2013. In addition to patient satisfaction and 30-day mortality and readmission rates, the data also looked at the frequency with which heart, pneumonia and surgery patients received the recommended care. The study looked at results three years before and after the acquisition, and compared those results to nearby hospitals not involved in M&A transactions.

Patient satisfaction scores at acquired hospitals tended to be worse, on average. Such scores take into account what rating a patient would give a hospital, and how likely they would be to recommend it to someone else.

Acquiring entities that had lower patient satisfaction scores to begin with tended to see the steepest drops post-transaction, suggesting that organizations with already-low scores could inspire a similar drop at their acquired facilities.

  • Advocate Aurora Health and Beaumont Health are in discussions to merge into a giant hospital system spanning three Midwest states. Beaumont has received more than $550 million so far in coronavirus bailout funds, and Advocate Aurora has received $328 million.
  • Atrium Health, Duke Health and Novant Health are in a multibillion-dollar bidding war to acquire New Hanover Regional Medical Center in Wilmington, N.C. Atrium has pocketed $149 million, Novant has received more than $80 million and Duke has gotten almost $50 million in bailout funds.
  • ProMedica is offering to take over the operations of the University of Toledo Medical Center. ProMedica has received $158 million in coronavirus bailouts.
  • Lifespan and Care New England in Rhode Island have rekindled merger talks. The two systems have combined for more than $64 million in coronavirus funds.

The New Hanover situation, in particular, shows that the pandemic isn’t slowing down market expansion, especially if the prize is big enough.

  • The three cash-rich systems are fighting over a profitable hospital that sits in a growing metro area with a stable workforce and rising household income — which therefore serves a lot of patients with lucrative commercial health insurance.
  • Novant CEO Carl Armato highlighted the system’s “strong” finances and resources in a June 10 presentation for the New Hanover facility — a much different message from an industry that has said, “This virus has created the greatest financial crisis in history for hospitals and health systems.”

The effects on competition and patients’ wallets will live on after the pandemic ends. The hospital industry has consolidated substantially during the past two decades and at an accelerated pace since 2010. Multiple studies have shown that hospital mergers have led to higher prices for commercially insured patients, but research about effects on improving the quality of care is mostly negative.

sources:

  1. https://www.axios.com/hospital-mergers-consolidation-coronavirus-b0805a49-db12-43dd-bc78-90009d0b09f1.html
  2. https://www.healthcarefinancenews.com/news/hospital-mergers-and-acquisitions-not-linked-better-care-study-finds
  3. https://www.nejm.org/doi/full/10.1056/NEJMsa1901383
Hospitals that have pocketed tens of millions of dollars in federal coronavirus bailouts are still pursuing big-ticket mergers and acquisitions!

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