In the past 20 years, the number of metropolitan service areas (MSAs) that have more than three healthcare systems has declined sharply as a result of healthcare reform, declining revenues and changing demographics.
Rather than damaging competition and reducing access to care, the consolidation trend may actually be a benefit to smaller community organizations and the patients they serve, according to a recent Trustee article co-authored by David Burik, a Managing Director in Navigant’s Healthcare practice.
One false assumption by many boards in two-hospital towns is the worry that a full-scale merger would violate antitrust laws. Often, however, the pro-competitive effects of the merger can negate any potential anti-competitive effects, Burik and his co-author, Monte Dube, say. Additionally, since at least one of the facilities in most two-hospital towns is government owned, it’s likely that its governmental status will protect it from antitrust concerns.
"Although the Obama administration's antitrust enforcers have begun to take a more active posture on hospital mergers, local boards should not avoid beginning meaningful merger discussions based solely on the unnecessarily cautious conclusion that, for antitrust purposes, a two-hospital merger will be dead on arrival," the authors write.
Alternatives to a merger include having two organizations in a community join separate multihospital systems located outside their town. This would maintain competition locally, but would also force the boards to hand over their local control. The leadership must decide whether staying competitive or keeping control nearby will better serve their mission.
Patients can see the benefit in a merger when the two boards maintain a "we" mindset rather than an "us vs. them" perspective and choose to consolidate with the goal of improving patient care, not market share. Some of the MSAs studied by Navigant and Proskauer reported great support from doctors who aimed to improve patient safety and quality, as well as open up access to comprehensive and coordinated care and bring on community members to launch behavioral health initiatives.
Hospital trustees who have long watched the consolidation trend and observed other system mergers from afar may be involved in similar discussions in the next few years, Burik and Dube say. The move to delivering value-based care has sped up in recent years due to reform, and the decision to merge or consolidate operations has led to significant strategic, financial, community and clinical benefits for some MSAs. Consolidation talks may soon be coming to a two-hospital town near you.