Healthcare News & Insights

How mergers may affect care, competition and bottom lines

More providers and payors are considering mergers and acquisitions, consolidating operations to boost revenue and save costs. But could the trend actually lead to more trouble for hospitals and patients? 

Earlier this summer, Anthem, one of the nation’s largest insurance companies, announced it would acquire competitor Cigna, renewing concerns among providers about how mergers may impact industry competition and networks.

Some believe these kinds of mergers could help the industry by narrowing networks, but others warn mergers could also have the opposite effect and create more issues for hospitals and patients alike.

Impact of carrier mergers

The authors of a recent article for the Journal of the American Medical Association (JAMA) believe that payor mergers could ultimately improve care for patients.

They note, the Affordable Care Act (ACA) has tried to preserve consumer options in insurance marketplaces. However, despite attempts to ensure networks are large enough to guarantee widespread coverage, many carriers’ networks continue to shrink due to consolidation and other factors.

About 50 percent of marketplace networks are considered relatively narrow. Additionally, recent research shows that about 41 percent of silver exchange plans created through the ACA had small or extra small networks, covering fewer than 25 percent of providers in a given area.

The authors believe these narrow networks could benefit patients, though. Here’s why: Narrow networks give carriers the ability to cut out low-performing hospitals and doctors, and nudge customers toward better provider choices.

For hospitals, the outcome could be mixed. As more payors merge, your hospital will have to work harder to improve outcomes and remain in their networks. Top-performing facilities will reap the benefits, but those who miss the mark may end up struggling.

Hospital merger pitfalls

In a different piece for JAMA, Dr. Martin Makary, a professor of surgery at Johns Hopkins University School of Medicine, and his collaborators lay out how mergers can negatively affect competition, care access and innovation – especially hospital mergers.

According to research, it’s expected that 20 percent of all hospitals will consider a merger by 2020. This is problematic because an analysis of healthcare competition in more than 300 geographic areas showed that competition is already scarce. More mergers could significantly reduce the number of healthcare options for patients, in addition to limitations set by insurance networks.

Some argue that mergers improve outcomes and treatments. However, the authors note that the biggest quality and safety successes in medicine have occurred through collaboration between different hospitals and outside groups, not through the efforts of one large health system.

The idea that mergers lead to better care could be a myth. Dr. Makary and his collaborators point to data linking competition with improved quality of care, more innovation and lower patient mortality rates. Additionally, a lack of competition could lead some health systems to raise prices, reduce treatment options and overtreat patients, the authors warn.

Other research has shown that the growing number of cost-sensitive patients prefer to shop around for their care. These patients are also more likely to delay care due to price. Here, mergers could negatively impact population health by restricting care options at multiple price points.

This means that hospitals may end up treating sicker patients in the long run. And since there’s more financial pressure on facilities to keep patients healthy, limiting their access to care via mergers may actually hurt a hospital’s bottom line.

The authors suggest it may be more beneficial for hospitals to consider alternatives to mergers for the sake of improving care. For example, they wrote, “Better triaging of patients to the best physician to provide care for clinical problems can be addressed through interoperability of electronic health records and better transparency.”

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