HOSPITAL MERGERS: Haven’t Reduced Number Of Beds
The wave of recent hospital mergers has not forced excess capacity from the health care system, according to a new study released by the Economic and Social Research Institute (ESRI). Instead, the study found that the mergers may have actually enabled facilities to resist market forces and protect excess capacity, because mergers tend to protect weaker facilities that would not have survived on their own. The findings come from a year-long study of hospital merger activity in St. Louis and Philadelphia. The study found that while hospitals have made "some significant progress in improving efficiency" -- such as consolidating administrative functions -- "these improvements do not appear to be caused primarily by mergers." In addition, the hospitals appear to be merging primarily to increase their bargaining strength with HMOs, not to improve efficiency. The study concludes that as a result, the hospital mergers in the two cities studied "have contributed to a bargaining stalemate between hospital systems and managed care organizations," which leaves the old, inefficient system largely intact.
Room For Improvement
The authors conclude that "employers and government payers may be able to shift this 'equilibrium' if they demand a more aggressive and comprehensive approach to health care cost management." They recommend that in order to break the stalemate, "payers would have to negotiate directly with the merged hospital systems or contract selectively with health plans willing to exclude some hospitals." ESRI President Jack Meyer said, "For policymakers, this means they should not rely on mergers to reduce excess capacity and produce efficiencies in the short term. Rather, the federal government needs to guard against anti-competitive behavior in the hospital industry in light of the current dramatic rate of consolidation." To obtain a copy of "Assessing the Early Impact of Hospital Mergers," call 202/296-1818 or click here (release 2/18).