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This website stores cookies on your computer. These cookies are used to collect information about how you interact with our website and allow us to remember you. We use this information in order to improve and customize your browsing experience and for analytics and metrics about our visitors both on this website and other media. To find out more about the cookies we use, see our Privacy Policy If you decline, your information won’t be tracked when you visit this website. A single cookie will be used in your browser to remember your preference not to be tracked. Accept Decline Reviewer Registration Reviewer Login Client Login * About Us * Services * Careers * Our Network * Contact * Blog * About Us * Services * Careers * Our Network * Contact * Blog REVIEWER LOGIN CLIENT LOGIN Healthcare News & Tech CONSOLIDATION IN THE HEALTHCARE INDUSTRY January 23, 2019 Mergers, acquisitions and other forms of consolidation in the healthcare industry are nothing new, but the increasing number of them occurring over the past few years is. Consolidation has increased noticeably since 2009 and doubled from 2011-2015. Statistics from Becker’s Hospital Review paint a clear picture of how consolidation has already shaped the healthcare industry: * Five for-profit insurers now control 43 percent of the market. * More than 60 percent of community hospitals belong to a health system. * Less than half of physicians own part of a private practice. According to Deloitte, the average health system acquisition deal is $224 million, up from $42 million in 2007, a trend that’s expected to continue, though the private health insurance market is more consolidated than that of providers. How does this affect healthcare consumers? A recently released survey shows that over 60 percent of adult Americans are concerned about the impact of hospital mergers and acquisitions on their access to affordable care. Let’s examine the two types of consolidation occurring in the healthcare industry. Vertical integration occurs when consolidation occurs between two companies producing different goods or services for one specific finished product, and horizontal consolidation occurs between firms who operate in the same space, often as competitors offering the same good or service. CAUSES OF CONSOLIDATION One primary reason for more recent consolidation in the healthcare industry is the emergence of government programs, including the Affordable Care Act (ACA) and the Medicare Access and CHIP Reauthorization Act (MACRA). From the passage of the ACA in 2010 through the end of 2016, merger and acquisition transactions from acute-care hospitals increased 55 percent. Another reason is the move from the fee-for-service financial model to a value-based care one. Declining reimbursements and the need for capital, especially to invest in technology, also play a role in the increase in consolidation. The use of technology is almost essential for healthcare organizations that want to compete with other providers that utilize value-based payment. The Healthcare Financial Management Association (HFMA) reports that “Achieving financial strength, reducing clinical variation, increasing scale and forming clinically integrated networks for improved care delivery are major considerations in various forms of consolidation.” According to an article in Becker’s Health IT & CIO Report, the five business drivers behind the healthcare transformation movement are fragmentation, scalability, efficiency, dominance and consumerism. ADVANTAGES OF CONSOLIDATION Touted benefits of consolidation in the healthcare industry include: * Increased care coordination * Reduced duplication of clinical services * Improved clinical integration and management * Reduced operating costs of 15−30 percent for acquired hospitals * Increased local access to acute care services * Reduced administrative costs DISADVANTAGES OF CONSOLIDATION Opponents of consolidation cite the following disadvantages: * Increased average price of hospital services by 6−18 percent * Reduced competition * No measured impact on quality * Limited patient benefits * Higher health insurance premiums, even with insurers paying less to providers A CONTINUING TREND Even with this increase in consolidation, there have not been many major moves from federal antitrust enforcement agencies to combat it. Based on that inaction and the continuing transition to value-based care, this consolidation most likely will not cease anytime soon. Deloitte predicts that only half of the health systems that were operating in 2014 will stay independent by 2025, and HFMA, in its series of reports titled “Health Care 2020,” foresees provider consolidation continuing to build. Healthcare executives also believe consolidation in the healthcare industry will continue. A HealthLeaders Media survey of such executives revealed that 87 percent said their organizations expected to explore and complete deals in the next 12-18 months. Though this consolidation trend doesn’t seem to be slowing, there will likely be rules and regulations put in place to protect consumers from rising costs that put healthcare out of reach for them. Increasing access to care is only effective if consumers can afford it. See a list of the services we offer to health plan payers, third-party administrators, medical groups, healthcare consulting organizations, hospitals, case management, insurance and pharmacy benefit companies, state and local governments and more. To learn more about AMR offerings and changes within the healthcare industry, read more on the AMR Blog. Consolidation in the Healthcare Industry SIGN UP FOR UPDATES: AMR needs the contact information you provide to us to contact you about our products and services. You may unsubscribe from these communications at any time. For information on how to unsubscribe, as well as our privacy practices and commitment to protecting your privacy, please review our Privacy Policy. Privacy Details By submitting this form, you are consenting to receive marketing emails from: Advanced Medical Reviews, LLC. 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