When hospitals merge the end result often means higher quality of care for patients, stronger clinical programs, easier access to resources and in some instances cost savings.
Just ask the three big health care systems in New Jersey: Hackensack Meridian Health, RWJBarnabas Health and Atlantic Health System.
Those giants are involved in mergers, acquisitions or strategic partnerships that will come to fruition this year.
While executives at the shrinking number of independent hospitals in the state are well aware of the increasingly turbulent environment in which they operate, they are standing their ground – confident that they have place in New Jersey’s health care market.
Dr. Robert Brenner, president, Clinical Integration, for Valley Health System, said he believes independent hospitals provide patients with high-quality care, strong clinical programs, and competitive pricing. “You do not need to be a part of an outright merger to give patients comprehensive care. This can be achieved through partnerships like the one Valley has with the Cleveland Clinic and Mount Sinai.”
Brenner said independent hospitals should remain competitive in the New Jersey market. Construction of a new Valley Hospital in Paramus is underway.
Michael Maron, president and chief executive officer of Holy Name Medical Center, is not perturbed by the merger trend in New Jersey and believes that independent hospitals play a vital role in providing quality care to patients.
“We continue to be creative and innovative and that makes us stronger than some of our larger competitors,” said Maron.
While there are no shortages of studies substantiating the claim that hospital mergers can result in greater economies of scale and greater efficiencies, other analyses reveal a different outcome.
A recent study published in the New England Journal of Medicine (NEJM) for instance showed that while the hospital industry has consolidated substantially during the past two decades and at an accelerated pace since 2010, multiple studies demonstrate that hospital mergers have led to higher prices for commercially insured patients. But research about effects on quality of care is limited.
The study funded by the Agency for Healthcare Research and Quality showed that an acquisition by another hospital or hospital system was associated with modestly worse patient experiences and no significant changes in readmission or mortality rates.
Some independent hospitals maintain that they have advantages allowing them to be competitive even in a health care universe dominated by large systems with multiple facilities.
“Holy Name remains independent because we’ve been resourceful and we’ve discovered ways to improve efficiency – and neither of those things negatively impact what we consider to be the very basic standards of care,” Maron said. “Quality and clinical coordination do not suffer as a result of being innovative.”
Nevertheless, independent hospitals face formidable competition. The struggle is not limited to quality of care, coordination of clinical services, or economic benefits of economies of scale. Some industry insiders contend that money and negotiating power are driving forces behind mergers and acquisitions.
Sometimes, but not always, insurance companies negotiate different prices with large hospital networks resulting in different reimbursement rates compared with independent hospitals. That can put the independents at a competitive disadvantage.
“If you’re a standalone hospital that can’t negotiate rates that support your bottom line, then you won’t have the ability to expand or grow. All of your talents and resources are then funneled into surviving, not thriving,” Maron said.
Maron contends that if independent hospitals are unable to find unconventional solutions and cannot shave costs elsewhere, then they are more likely to be forced to merge.
Despite what some see as an uphill battle, independent hospitals contend that they have more than a few tools at their disposal.
We continue to be creative and innovative and that makes us stronger than some of our larger competitors.
– Michael Maron
Among them is the belief that health care is personal and local and the relationship between a person, their doctor and their hospital is significant.
“People desire that connection and trust. And that type of relationship is better managed when you have similar sized competition – not large health care behemoths that monopolize the market. It’s not going to be as personal,” Maron said.
Health care experts contend that long-term viability depends on whether the system remains transactional and fee-for-service, or moves to a value-based system. Large systems benefit in a transactional fee-for-service system due to negotiating leverage. Independent hospitals can fare better in a value-based, price-transparent system, where consumerism is embraced.
The rise of consumerism is viewed by some experts as another way for independent hospitals to attract new patients and compete with the big players.
As prices and services become more transparent, patients will have the autonomy to choose in some instances, where they go for care.