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Are Hospital Mergers the Answer?

Peter L. Slavin and David F. Torchiana examine the pros and cons of hospital mergers.

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The most significant provisions of the Affordable Care Act are slated to begin in 2014, yet preparation for what lies ahead has been under way for several years. The new law is one reason for the steady rise in mergers, affiliations and joint ventures between and among health care providers. From the provider perspective, these connections represent an important avenue that enables hospitals, physician groups and others to increase access to care, improve quality and service, consolidate duplicative activities and reduce costs. From a policy and antitrust perspective, some are skeptical that these changes will do anything other than strengthen provider market power and increase costs.

These directly opposing views live in separate universes in different branches of our federal government. The current enthusiasm for accountable care at the Centers for Medicare & Medicaid Services is based on the concept that giving providers the responsibility for managing the care of a population leads to more effective resource allocation than traditional, fragmented fee-for-service payment. Increasingly, providers are seeking to align with larger networks to improve their chances for success under a system in which reimbursement will depend on value rather than volume of services. The new health law sets penalties for failing to meet certain goals, and stand-alone hospitals and solo and small group practitioners who aren’t part of a larger network may find it increasingly difficult to survive. At the same time, the Department of Justice and the Federal Trade Commission are charged with making sure that markets remain competitive. Mixed signals are inevitable.

In this issue of Proto, we examine this merger trend and try to decipher what impact it may have, not only on how care is delivered but also on the culture, identity and missions of the merging organizations. We also look at the mounting tension between (1) the pressure to integrate and (2) the intense scrutiny by the FTC and other agencies aimed at maintaining adequate competition in local markets.

For hospitals and other providers seeking to fulfill their missions in an era of shrinking reimbursement, mergers could be the lifeline that pulls them through a difficult period. Being part of a bigger, inclusive network can offer access to the infrastructure, information technology and support needed to compete, succeed and, most important, serve patients and families appropriately and efficiently. Optimizing the balance between size and competition will be critically important and very challenging.

Peter L. Slavin, M.D.
Massachusetts General Hospital
David F. Torchiana, M.D.
CEO and Chairman
Massachusetts General Physicians
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