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AHA Reports Hospital Mergers Reduce Costs, Improve Care


January 27, 2017

In a recent analysis commissioned by the American Hospital Association (AHA), titled “Hospital Merger Benefits: Views from Hospital Leaders and Econometric Analysis,” researchers showed that hospital mergers significantly impacted cost savings and quality improvements that cannot be replicated by looser affiliations.

“Patients deserve a high-value, high-performing health care system,” Rick Pollack, president and chief executive officer of the AHA, said in a press release. “The key to transforming health care delivery is increased efficiency and quality. In some communities and for certain hospitals, consolidation may be necessary—not only to meet the current health needs of patients and communities—but also to provide a stable foundation upon which to build the health care system of the future.”

The analysis, which was prepared by economists at Charles River Associates (CRA), examined how hospital mergers can provide a framework to transform health care across the United States. Researchers performed structured interviews about merger experiences with executives from 20 hospital systems during 2016.

The data show that mergers do not necessarily lead to a spike in revenues; however, they found that mergers can result in savings and innovation improvements necessary to transform health care delivery.

According to the results of the study, CRA researchers found that mergers decreased costs based on the reduced costs of capital and clinical standardization among other efficiencies. An empirical analysis showed an approximate 2.5% reduction, or $5.8 million, in annual operating expenses at acquired hospitals. Additionally, hospital mergers can potentially drive quality improvements through standardization of clinical protocols and investments to upgrade facilities and services at acquired hospitals. Further, they found that mergers also expanded the scope of services that are available to patients and built upon existing institutional strengths to provide more comprehensive and efficient care.

The researchers also found that revenue per-patient admissions also declined by 3.9%. They noted that these finding suggest that higher hospital concentration is not associated with higher prices paid by insurance plans after mergers.

“Our research pairs real-world observations from some of America’s top hospital executives with a comprehensive economic analysis to produce the most comprehensive examination of hospital mergers in years,” Monica Noether, PhD, vice president of CRA and the paper’s lead author, said in a press release. “The findings are clear: hospital mergers facilitate greater efficiency that reduces costs and encourages better quality care.”

Julie Gould (Mazurkiewicz)

Reference:

Noether M, May S. Hospital Merger Benefits: Views from Hospital Leaders and Econometric Analysis. http://www.advancinghealthinamerica.org/wp-content/uploads/2014/08/Hospital-Merger-Full-Report_1.25.17.pdf. Charles River Associates. January 2017.

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