Hospital Mergers

In a time of increasing hospital mergers and health plan jitters, will executives be able to work together?

In an atmosphere where health plans and hospital managers have trouble trusting one another, mergers — and even megamergers — are on the horizon, even as the Federal Trade Commission (FTC) wants to hold them back.  All that as a new administration takes office should make for an interesting 2017 for Hospital CFO’s and revenue cycle teams.

Hospitals and Health Plans Have Trust Issues

Surprise:  “Hospitals don’t trust health plans. Health plans don’t trust hospitals.”  This from the opening release of the 10th Annual Revive Health Trust IndexTM study by Revive Health.

“Health plan executives expect about 44 percent of 2016 claims will be based on value, while health system executives expect only 13 percent of 2016 revenues from value-based payments.”

Writing in The National Law Review, Gary Scott Davis is of the opinion that, “the healthcare environment has changed so new attempts  to launch a hospital-owned health plan should work.”  For example, he notes that hospitals and health systems now have the benefit of more sophisticated health information technology that makes care coordination and cost control less daunting for health systems.

This change in the technological landscape in healthcare coincides with some hospitals playing a significant role in blocking two big insurer deals.  USA Today has reported that advocacy groups for both physicians and hospitals lobbied the U.S. Department of Justice to block the mergers between Aetna and Humana, and Anthem and Cigna.

Then there’s the story of “Oscar” a new wave “disrupter” in the health markets.  According to an article in VOX, “Oscar’s largest market is New York. There, it will cut the number of doctors and hospitals it contracts with in New York by more than half in order to gain more control over the pricing and patient experience. So this, then, is Oscar’s coming pitch: less choice of where to get care but a much better, more seamless experience once you’re getting care.”  Hmm.  Is this the answer?

Hospital Mergers Continue… MegaMergers Possible

Talk about distrust — the FTC has its own issues with hospital system mergers.  As Fierce Healthcare reports, “the FTC said merging the two hospital systems into a single 16-hospital system would allow for a market monopoly that could extract higher rates from payers. Advocate and NorthShore argued that the market analysis they used was too narrow.” But the hospitals’ management have problems with mixed messages from the government.  In the same article, author Ron Shinkman explains that the health systems protested the decision, stating that, “We believe that blocking this merger will be a loss to consumers and further underscores the conflicting message with the objectives of the Affordable Care Act.”

Becker’s Hospital CFO is reporting on the motivation for hospital mergers — increased revenue.  “Brentwood, Tenn.-based LifePoint Health reported revenues of $1.6 billion in the third quarter of 2016, up 21.1 percent from revenues of $1.3 billion in the same period of 2015.”  The health group said in a statement that the revenue increase was primarily due to recent mergers, noting, “LifePoint has acquired several hospitals in recent years, including Clark Memorial Hospital in Jeffersonville, Ind., Fleming County Hospital in Flemingsburg, Ky., Watertown (Wis.) Regional Medical Center, and Providence Hospitals, a two-hospital system in Columbia, S.C.”   We read LifePoint Health’s new release and while this is good for shareholders, the release gives no details of how the mergers may be helping contain costs for patients.

Meanwhile Physicians News Network is reporting that Dignity Health, with 400 care centers, including 39 hospitals, in 22 states, is looking to make a megamerger move with CHI, based in Englewood, Colorado, which operates 103 hospitals, including four academic health centers and major teaching hospitals, 30 critical-access facilities in 18 states.

And the mergers continue… Becker’s Hospital Review lists 20 recent moves to consolidate including some deals that are done and some beginning with “letters of intent.”

In the middle of all the continuing merger mania and wary atmosphere between executives in hospitals and for payer plans, the Revive Health study on trust in healthcare has a list of smart advice that includes, “Communication, education and awareness, and physician and employee engagement play a huge role in driving trust among key stakeholders and in your brand. With better communication between and among health systems, health plans, and front-line physicians, trust will improve, which in turn will help improve the patient experience and (hopefully) consumer trust in the healthcare system.”

As a technology solutions company for end-to-end revenue cycle management, The SSI Group appreciates especially this advice from the same study:

Secure partners to deliver relevant, trustworthy data:  Another key factor providers say holds them back from a more rapid transition to value-based payment arrangements is the lack of technologies and processes to support this transition, including access to timely, reliable, and actionable data.

We will continue to write about hospital mergers, the health plan factor, and how this affects the hospital revenue cycle looking into 2017 and beyond.