New research indicates hospital mergers reduce costs, enhance quality of care

Sept. 10, 2019

New research confirms the significant value hospital mergers can generate for patients and their communities, reports the American Hospital Association. The noted report, Hospital Merger Benefits: Views from Hospital Leaders and Econometric Analysis - An Update, was prepared by economists from Charles River Associates and is an update of their 2017 report.

AHA says the latest findings both reinforce and strengthen the previous report’s conclusions that hospital mergers result in benefits that accrue to patients in the form of better care and reduced costs.

The report includes findings from structured interviews with 10 health systems, which identified a number of areas in which mergers and acquisitions have eased cost pressures and expanded access. The update also supplements previous econometric analysis with data on cost, quality and revenue measures for hospital transactions from 2015 to 2017.

“Mergers have become one of the critical means through which hospitals can provide their communities with high-quality, convenient and cost-effective care,” said Rick Pollack, AHA president and CEO in a press statement. “The benefits of mergers allow hospitals to create connected networks of care and keep the focus where it belongs: on improving care for the patient.”

The newest analysis demonstrates that mergers can lead to enhanced quality through the expansion of clinical best practices, as evidenced by statistically significant declines in the rates of readmission and mortality rates following mergers. The study highlights how scale is increasingly critical to maintain and enhance the infrastructure necessary to address social determinants of health, adopt population health strategies and promote value-driven care.

In addition, integration can ensure that local access to care and breadth of services are maintained for patients, and in some cases expanded. Mergers can offer financial stability for struggling hospitals through operational efficiencies associated with shared costs for expensive IT infrastructures and purchasing, access to a robust network of system resources, equipment and facility upgrades. Newly integrated systems are also able to provide patients with access across the full continuum of care. This leads to more regular and convenient access to physicians, including specialists.

Key findings also include:

· Mergers decrease costs. Due to increased scale, acquisitions decrease costs and are associated with a statistically significant 2.3 percent reduction in annual operating expenses. 

· Mergers often facilitate quality improvement through updating clinical operations across a health system, implementing consistent best practices and enhancing the promise of technology and data analytics.

·  Revenues per admission at acquired hospitals decline by a statistically significant 3.5 percent relative to non-merging hospitals, which suggests that “savings that accrue to merging hospitals are passed on to patients and their health plans.”

Monica Noether, PhD, Vice President at CRA and the paper’s lead author said, “Health system leaders consistently spoke of the heightened pressure to provide better care more efficiently. Our econometric research indicates that the scale that hospital mergers can provide results in the cost-effective delivery of high quality care.”