Health IT’s Role In Hospital Consolidation
In this time of “transformative care delivery,” all stakeholders are seeking ways to align to best meet the challenges, says Jeff Micklos, executive VP and general counsel of the American Federation of Hospitals (AFH).
The American Federation of Hospitals released a study in January that found growing consolidation in the hospital industry is bringing a range of benefits to patients and communities, including larger and more integrated health systems that are better able to contain costs and improve care.
The study runs counter to efforts across the country to halt hospital consolidation on the grounds that such mergers eliminate competition and drive up costs.
Either way, hospital consolidation is on the rise. More than 105 hospital mergers occurred in 2012, up from about 50 to 60 annually from 2005 through 2007, according to a January report published in the New England Journal of Medicine.
The role of health IT
Health IT is a contributing factor in many consolidations. “EHRs are not cheap,” says Micklos. “They require a lot of input and planning and there is a certain benefit to scalability—spreading the cost over a system.”
Smaller hospitals are finding that they are falling to the bottom of EHR vendors’ queues because it’s just more attractive to vendors to work with larger organizations, says Micklos. This lack of access to vendors for smaller providers has become a factor in consolidation, he adds, because it hinders their ability to meet the requirements of Meaningful Use and other federal programs.
Current consolidation activity, unlike during other phases where hospitals were more likely to look for a particular acquisition, finds hospitals asking to engage in these conversations, Micklos says. “That’s relatively unique.”
There’s no denying the increasing trend of hospitals mergers, says Lorren Pettit, vice president of market research for HIMSS Analytics. The average number of hospitals in an integrated delivery system last year was 7.3 compared with 7.0 in 2012 and 6.9 in 2011. “We can see this trajectory going on for a while.”
The consulting arm of the health IT advocacy organization believes IT is driving part of this trend. For one thing, organizations have the capital available to conduct acquisitions. For another, healthcare reform is causing organizations to feel the need to strengthen and protect their market, Pettit says. Finally, “smaller hospitals with their IT systems just can’t do it—they can’t make it alone.” Population health management, reimbursement changes and more result in a big hill to climb for smaller facilities. “It’s too daunting. Therefore, they are looking to a bigger entity to latch onto.”
The benefits of care coordination are an important factor of antitrust concerns, says Micklos. “Health IT is an important aspect of that. A hospital that now has a better platform to adopt an EHR will improve access to care.”
The changes in healthcare make for an unstable environment, Pettit adds. The focus on population health management “changes the whole approach to healthcare. As opposed to a competitive environment, it’s not about getting patients but managing them.” Not all the rules are known and everyone is “feeling it out.”
Learning the rules as we go is sure to continue changing the landscape.
Taking the Issue to Congress A September House Committee on the Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law hearing allowed various legal experts to share their concerns about the rise on hospital consolidation. Some testified to the need for strict antitrust enforcement and oversight while others said consolidation aids efforts to improve quality and efficiency. Most Americans face monopoly power in their local hospital markets, Barak Richman, JD, PhD, healthcare economics, law and policy professor at the Duke University School of Law in Durham, N.C., told the committee. Richman cited mergers and acquisitions in the 1990s that resulted in significantly higher prices—up to 40 percent when the merging hospitals were in close proximity. Oversight agencies should carefully monitor the creation of accountable care organizations under the Patient Protection and Affordable Care Act (PPACA), he said, adding that the new alliances pose a “serious danger” and could result in even more market power for dominant providers. The PPACA might be making the hospital market monopoly problem worse, said Thomas Miller, JD, a resident fellow in health policy studies at the American Enterprise Institute. The law will entrench already dominant providers, discourage start-up efforts and encourage further consolidation to increase market share, he told the committee. Meanwhile, the success of the PPACA depends on provider competition, according to Thomas Greaney, JD, a professor of law at the Saint Louis University School of Law. And, mergers and acquisitions are an essential means for providers to achieve improved quality and reduced costs, according to Sharis Pozen, JD, of Skadden, Arps, Slate, Meagher & Flom, who spoke on behalf of the American Hospital Association. Pozen, who formerly led the Antitrust Division at the U.S. Department of Justice, testified that “outdated regulatory barriers” can prevent hospitals and physicians from working closely together unless they’re under the same ownership. Pozen also said the rate of hospital acquisition has been exaggerated, citing an AHA study that found only 10 percent of U.S. hospitals were involved in a merger or acquisition between 2007 and 2012. |
Editor
Editor Beth earned a bachelor’s degree in journalism and master’s in health communication. She has worked in hospital, academic and publishing settings over the past 20 years. Beth joined TriMed in 2005, as editor of CMIO and Clinical Innovation + Technology. When not covering all things related to health IT, she spends time with her husband and three children.