New Research Confirms: Hospital Mergers Reduce Costs, Enhance Quality of Care for Patients

WASHINGTON (September 4, 2019) — New research released today confirms the significant value hospital mergers can generate for patients and their communities. The report, Hospital Merger Benefits: Views from Hospital Leaders and Econometric Analysis - An Update, was prepared by economists from Charles River Associates and is an update of their 2017 report. The latest findings both reinforce and strengthen the previous report’s conclusions that hospital mergers result in benefits that accrue to patients in the form of better care and reduced costs.

 

“In this era of rapid change within the health care sector, hospitals and health systems remain committed to meeting the needs of all patients,” said Rick Pollack, AHA president and CEO. “Mergers have become one of the critical means through which hospitals can provide their communities with high-quality, convenient and cost-effective care. The benefits of mergers allow hospitals to create connected networks of care and keep the focus where it belongs: on improving care for the patient.”

 

The newest analysis demonstrates that mergers can lead to enhanced quality through the expansion of clinical best practices, as evidenced by statistically significant declines in the rates of readmission and mortality rates following mergers. The study highlights how scale is increasingly critical to maintain and enhance the infrastructure necessary to address social determinants of health, adopt population health strategies and promote value-driven care.

 

In addition, integration can ensure that local access to care and breadth of services are maintained for patients, and in some cases expanded. Mergers can offer financial stability for struggling hospitals through operational efficiencies associated with shared costs for expensive IT infrastructures and purchasing, access to a robust network of system resources, equipment and facility upgrades. Newly integrated systems are also able to provide patients with access across the full continuum of care. This leads to more regular and convenient access to physicians, including specialists.

 

Key findings also include:

  • Mergers decrease costs. Due to increased scale, acquisitions decrease costs and are associated with a statistically significant 2.3% reduction in annual operating expenses.  
  • Mergers often facilitate quality improvement through updating clinical operations across a health system, implementing consistent best practices and enhancing the promise of technology and data analytics.
  • Revenues per admission at acquired hospitals decline by a statistically significant 3.5% relative to non-merging hospitals, which suggests that “savings that accrue to merging hospitals are passed on to patients and their health plans.”

The report includes findings from structured interviews with 10 health systems, which identified a number of areas in which mergers and acquisitions have eased cost pressures and expanded access. The update also supplements previous econometric analysis with data on cost, quality and revenue measures for hospital transactions from 2015 to 2017.

 

Monica Noether, Ph.D., vice president at CRA and the paper’s lead author said, “Health system leaders consistently spoke of the heightened pressure to provide better care more efficiently. Our econometric research indicates that the scale that hospital mergers can provide results in the cost-effective delivery of high quality care.”

 

A copy of the full Charles River Associates study, executive summary, infographics and case studies are available here.

 

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Contact:        Marie Johnson, (202) 626-2351, mjohnson@aha.org

Sean Barry, (202) 626-2306, sbarry@aha.org

 

About Charles River Associates

Charles River Associates® is a global consulting firm specializing in economic, financial, and management consulting services. CRA advises clients on economic and financial matters pertaining to litigation and regulatory proceedings, and guides corporations through critical business strategy and performance-related issues. Since 1965, clients have engaged CRA for its unique combination of functional expertise and industry knowledge, and for its objective solutions to complex problems. Headquartered in Boston, CRA has offices throughout the world. Detailed information about CRA, a trademark of CRA International, Inc., is available at www.crai.com.

 

About the American Hospital Association

The AHA is a not-for-profit association of health care provider organizations and individuals that are committed to the health improvement of their communities. The AHA is the national advocate for its members, which include nearly 5,000 hospitals, health care systems, networks, other providers of care and 43,000 individual members. Founded in 1898, the AHA provides education for health care leaders and is a source of information on health care issues and trends. For more information, visit the AHA website at www.aha.org.

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