Hospital Realignment: Mergers Offer Significant Patient and Community Benefits

Center for Healthcare Economics and Policy

January 23, 2014

Hospital mergers offer substantial benefits for patients and communities. This study provides a comprehensive review and analysis of hospital merger studies and trends that uncovers a reality rooted in research and quite different than what many people think.

Hospital consolidation has been much studied, but often on narrow issues without the comprehensive examination that provides understanding of its overall effects. The extensive review of trends and literature provided in this study illustrates this point and finds that there is not a sufficient appreciation of the positive contribution realignment makes to patients and communities.

All too frequently, conventional wisdom suggested by media coverage is that hospital realignment, mergers and consolidations systematically result in pricing power, with anticompetitively higher prices for those needing care. Yet, in terms of prices for consumers, this study’s extensive review of the literature finds no consistent statistical relationship between consolidation patterns and hospital prices across the studies. What also can get lost is that these claims about hospital merger effects often rely on outdated data that do not reflect today’s dynamic market conditions.

This comprehensive analysis of consolidation studies reveals hospital realignment offers benefits including improved service offerings, cost reduction, and enhanced competitiveness. Importantly, the analysis underscores that without realignment, patients and communities could face disruption and instability, hospital closures, and reduced access to care.

Under current conditions, hospitals are moving toward a new system of coordinated care as a means to maintain, improve, and expand access for patients. This trend comes as another broader trend is taking place with important implications across the economy: a spending slowdown in health care that many experts believe is structural and likely to continue. Currently, health care inflation is at record lows, as is spending growth at hospitals and other providers throughout the country.

Overall, the impact of hospital realignment – particularly in the challenging environment today – is much broader than what currently is being discussed. This study outlines and examines major systemic changes occurring across the health care system that are driven by a number of factors, such as policy, economic conditions and demographics. This analysis also highlights that many of the studies cited in recent media reports and by academia focus on hospital business transactions of the 1990s, a data set that is old and not representative of the operating environment in which hospitals compete.

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