Minnesota Lawyer
By Thomas A. Barstow
Special to BridgeTower Media Newswires
Patrick Michael Plummer
As hospitals and health systems nationwide continue to merge, few observers expect the trend to stop anytime soon.
It is an assessment shared by multiple health care experts, including those who think mergers don’t help employers or consumers save money. The trend is so strong that large systems already growing through multiple marriages will continue to look for ways to increase market share through additional deals, observers noted.
Of course, there are fewer targets left.
In New Jersey, less than a quarter of the hospitals remain independent, said Kerry McKean Kelly, vice president of communications and member services for the New Jersey Hospital Association. Further consolidations will be driven by the search for “good quality care at the most effective cost,” rather than cost savings alone, Kelly said.
“All merger activity is an effort to find that balance in health care,” she said.
In Pennsylvania, about 27 hospitals are independent, with another 128 hospitals in health systems, said Andy Carter, president and CEO of the Hospital and Healthsystem Association of Pennsylvania. His group reports a 78 percent reduction in independent hospitals since 2000.
Lower costs? Not necessarily
One recent marriage playing out in the mid-Atlantic involves Jefferson Health in Philadelphia, which is absorbing southern New Jersey-based Kennedy Health.
The benefits to consumers will include greater access to care and better value, but not necessarily lower costs, said Joseph W. Devine, president, New Jersey division, and an executive vice president at Jefferson Health.
“The hope is that it will not be getting any higher,” said Devine, the former CEO of Kennedy Health. “The ultimate goal is that the cost will remain stabilized.”
Beyond their control
John Rother, president and CEO of the National Coalition on Health Care in Washington, D.C., said a lot of health care costs are beyond a hospital’s ability to control. And cost pressures can be exclusive to a given market, such as where there is intense demand for skilled workers, he said.
Any savings through mergers often come down to overhead and combined services – back-office operations such as billing and paperwork – that don’t translate into lower bills for consumers, he said.
“Every hospital is different. Whether they continue services or not is a local thing,” he said. “But I don’t think that I have heard of where a merger meant lower prices for consumers.”
Key benefit is access
Patrick Michael Plummer, a professor of health administration at Penn State Harrisburg in Pennsylvania, said mergers always start with the intent to save money.
But, he said, “A lot of the studies show the cost savings are not there.”
Nonetheless, Plummer said, measures other than money can be more important: access to care, capacity of services and the ability to provide service.
“The market is changing so fast; those aspects always are in play,” he said.
Attrition, layoffs
The changes, especially if cultural differences are not properly addressed, have led to the failure of mergers, Plummer said.
At a minimum, attrition will occur.
Some health care workers accustomed to an independent hospital might not like the focus on management and corporate rules a larger system may demand, Plummer said.
They will either leave or be replaced, especially as the new organization sorts through questions about what services stay, which ones go, where services will be consolidated and so on.
That process also might mean layoffs, especially for services that can be outsourced or consolidated, he said.
‘Tough decisions’
Last fall, Jefferson Health and Thomas Jefferson University said they would be eliminating up to 1 percent of the jobs in a 30,000-person workforce, said Gail Benner, a Jefferson spokesperson. She did not elaborate on which positions would be cut.
“These are tough decisions,” Plummer said.
Often, front-line health care workers, such as nurses and doctors, are too in-demand to lose.
“As one hospital gets integrated into another hospital, they go after the low-hanging fruit first,” he said.
Nurses mostly unaffected
Also, pay and benefits are dictated by local markets, so there might not be much wiggle room to cut pay or to find savings in that area, Rother and Plummer said.
In Pennsylvania, nurses have not felt great pressure from the trends, said Betsy Snook, CEO of the Pennsylvania State Nurses Association.
Beyond changes in policies and procedures, as well as adjusting to new information technology systems, she said, “In general, it doesn’t really affect the nursing staffs.”
Resource allocations
At Jefferson, which has brought in other hospitals in recent years, the merger with Kennedy should be completed by the end of the year and will include determining how to best allocate patient resources, Devine said.
Regional referral centers will help patients find the best service, which might include specialty care in downtown Philadelphia or service closer to home. The idea is to grow, he said, not to contract.
“We will identify where to provide services and what kinds of clinical services to provide,” Devine said. As an example, he added, “What in Philadelphia can be provided in New Jersey?”
Some of the biggest adjustments included areas where Kennedy needed expertise, such as in digital medical information, where Jefferson already had infrastructure in place.
“We didn’t need to merge,” he said. “We were looking for who would make the best partnership.”
Continual evaluation, pressure
Rother said hospitals continually must evaluate whether their customers have the access to care, quality of care and cost of care to remain viable, especially as the foundations keep shifting. The push by large retailers, such as Walmart and Amazon, into the health care market could help consumers, as well as take some pressure off health systems, he said.
“I don’t think of it as competition as much as the ability to relieve the need to add more beds,” Rother said.
In a lot of cases, market pressures are too much for an independent hospital to bear, unless it is in a geographic area with little competition and managers have found ways to keep costs in check while providing great care, observers noted. But Rother said those stories are becoming increasingly rare.
“The little guys merge because they are afraid they are going to get squeezed out,” he said. “The smaller ones are under a lot of pressure.”
