Hospital Mergers are ‘Growing Apart,’ Not ‘Melding Cultures’
Several years after "merger mania" swept the hospital industry in New York and nationwide, most major health care facilities that "went to the altar appear to have been joined in legal documents and back-room functions only," the New York Times reports. In New York, hospitals that merged have combined few clinical programs and have joined none of the medical schools that serve the facilities, while promises of "financial triumph" remain "largely unrealized." Hospital officials say that "full-service hospitals are badly needed in every neighborhood in Manhattan" and that more "fully combining" the facilities could "dilute the high quality of care many New Yorkers now expect." In addition, they point to the merger of the hospitals at Stanford University and the University of California-San Francisco, which "fell apart" less than two years after the hospitals "tried to meld too many operations too soon." However, the Times attributes hospitals' decisions not to "merg[e] more fully" on doctors who, "unwilling to give up power," will not "stand for it." Robert Field, director of the graduate program on health policy at the University of the Sciences in Philadelphia, said, "If you merge two hospitals, you have a large number of prima donnas who are used to taking orders from no one. While having all of certain procedures in one place might mean higher quality, each hospital still tends to remain a cost and profit center and [is] not willing to give things up."
Hospitals in New York and across the nation have merged in order to "save money" by "becoming bigger," hoping to "fight back" managed care organizations "slicing away at reimbursements." However, while the Times reports that "some money was saved" by combining "behind-the-scenes functions," joining major clinical programs and "melding cultures has not happened." Hospital trustees have "pushed for more consolidation," but officials point out that in many mergers where hospitals combined clinical programs, "embittered doctors left and programs fell apart." In academic medical centers, doctors "yield enormous power" because they "bring in" the patients -- and the revenue. "I work for the doctors. They don't work for me," Peter Kelly, CEO of New York-based Continuum Health Partners, said. Many hospital officials also fear that by "giv[ing] up a single department, their status will erode." Dr. John Kastor, author of a book about teaching hospital mergers, said, "If you don't offer full services, you can't train residents fully. But [offering full services] is also an ego trip, because any hospital that doesn't offer every service is not a real hospital, in its view."
Although hospital centers that have merged in New York have saved about $30 million to $50 million, individual hospitals "barely broke even or lost money" last year and have fired employees and "trim[med]" budgets. "If you look nationally, there are a lot of question marks about a lot of mergers," Bruce Gordon, an analyst at Moody's Investors Service, said. The Times reports that "financial troubles" have resulted largely from "factors outside the mergers," including "huge" reductions in Medicare reimbursement rates and increased "pressures" from MCOs. However, many hospital officials argue that "unified, they have weathered the economic turmoil better" by negotiating "better terms and higher rates" from MCOs. Still, some hospitals that "flirted but ultimately remained single" during the "merger explosion" have "little regret" (Steinhauer, New York Times, 3/14).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.