While 2015 saw record-breaking merger and acquisitions activity, the health care sector is expected to see much more of the same this year. At the end of last year, professional service network PricewaterhouseCoopers's Health Research Institute predicted that 2016 would be the "year of merger mania," and so far that theory is shaping up to be true. So, now that we are a few months into the year, how are these mergers impacting health care?
What hospitals are saying
In Arizona, two hospitals announced a merger that will create New Vision Health, a system that the company hopes will lead in regional healthcare, according to a report by Healthcare Finance News. By merging the operations of the two hospitals, officials aim to promote financial efficiency and provide more resources to staff – both of which are common motivations behind most of the recent M&A activity.
In January, two New Jersey hospitals signed off on a merger in a room full of exuberant witnesses, as reported on NJ.com. With promises of "revolutionizing" health care in the area, it's no wonder the crowd was so excited.
"Today we are going to be a part of one of the most successful institutions in the country," said Joseph W. Devine, president and CEO of Kennedy Health, one of the hospitals involved in the merger.
According to NJ.com's overview of the announcement, leaders from both hospitals assured that the impetus behind the merger was providing better care, not making financial gains. The report also noted that Thomas Jefferson University Hospital, the second entity involved, has already closed a series of merger deals prior to this one.
What economists are saying
These high hopes for mergers are not uncommon. Harvard Health Publications' Editor in Chief, Gregory Curfman, wrote that hospitals often list the benefits of merging, such as higher quality of care and lower costs, but there are downsides as well. Citing the concerns of health economists, Curfman noted that mergers create large health systems with more power in the market, which could eventually drive up health costs. For example, a health system could be in a position to ask insurance companies to pay more, which would affect consumers' premiums.
As more hospitals join their forces, it only creates an environment where it's harder for independent facilities to stay afloat. In December of last year, Healthcare Finance News quoted South Jersey Healthcare Regional Medical Center's CFO Tom Baldosaro, who said of 2016: "Big is going to be better. Small is not going to survive."
While mergers have been a common solution to promote unity and efficiency in health care, some providers choose to outsource operations like revenue cycle management to do the same. For more information, contact Professional Medical Services today.