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The Pulse: How Does Hospital Consolidation Help, Or Hurt Patients?

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Rhode Island’s two largest health care systems have resumed talks about a possible affiliation. It’s not the first time Lifespan and Care New England...

Rhode Island’s  two largest health care systems have resumed talks about a possible affiliation. It’s not the first time Lifespan and Care New England have hinted at a future relationship, but most of the details remain under wraps.  For this week’s The Pulse, I explore the ups and downs of a potential partnership for the hospitals and for patients with news director Elisabeth Harrison. 

Here's a transcript of our conversation.

ELISABETH: Kristin, our colleague Scott McKay caught wind of these talks earlier this week. He reported on what’s different this time, with new leadership at the helm for each of these health care systems, and just a really different health care environment. We know these talks are preliminary, we don’t know many details. But what might be driving these talks?

KRISTIN: The big picture is that hospitals everywhere are trying to position themselves to survive in a new health care landscape. They’ve been facing a greater number of empty beds, combined with changes in the way they’re paid to care for big populations of patients – that’s thanks to the affordable care act. Lots of systems around the country are consolidating, not only to achieve some cost-savings, but because there’s this hope that a bigger, more integrated system will be in a better position to care for a population. I reached out to an expert for a bit more insight. Gerard Anderson runs the center for Hospital Finance and Management at Johns Hopkins University. He says one big hospital system would have a lot of leverage with insurance companies in setting rates. Have a listen.

Gerard Anderson, Johns Hopkins University: “If there’s only one hospital system, you absolutely have to contract with them, so you’ve got complete bargaining power with the Blue Cross plan, or United Healthcare, or any of the other health plans in your community.”

ELISABETH: It still sounds like at its core, this is about money. Leverage in negotiations could mean higher reimbursement rates from health insurance companies, right?

KRISTIN: Right, although again, I should stress we don’t know the details. But hospitals negotiate rates with insurers, and it turns out there’s a lot of variation among hospitals in terms of what they get paid for certain services. A partnership of some sort might level the playing field for hospitals in the Lifespan/Care New England systems. But it could also put hospitals outside those systems at a disadvantage when it comes to negotiating with insurers.

ELISABETH: What other impact could a merger have for hospitals and facilities outside of Care New England and Lifespan?

KRISTIN: Most of the other hospitals in the state have already partnered with a larger organization. Landmark is owned by a for-profit company. Westerly joined a hospital system in southeastern Connecticut. But they might have trouble competing with a big system that has the specialties, the broad array of services, the convenience and access patients want.                                                         

ELISABETH: But what about patients? Are there other examples of large mergers like this that might give some clues about how patients fare when large hospital systems merge?

KRISTIN: There’s some evidence that consolidation leads to higher prices for patients – you know, when one giant system has kind of a corner on the market. But Anderson says there could be more benefits. One is better sharing of medical records. Right now most hospitals have their own medical records systems, and he says they’re not great at sharing that information with other systems. Two systems coming together could help patients by making their medical information more widely accessible – a pretty big deal in an emergency, for example, or even to help your primary doctor stay on top of your health care. But Anderson says there’s another benefit: specialization. Here he is again:

Gerard Anderson, Johns Hopkins University: “The second thing is identifying which hospital will take the lead in certain very specialized services like heart transplants or liver transplants. You want one hospital to do it really well, instead of having two doing it ok, each one of them.” 

KRISTIN:  In other words, two health care systems partnering up might decide, hey, you know what, this particular hospital is really good at delivering babies. So let’s leverage that. Hospitals these days get bonuses for quality. Hospitals with better patient outcomes, fewer mistakes, and so on, they’re not as likely to get dinged with fines from the Centers for Medicare and Medicaid Services.

ELISABETH: Kristin Gourlay, as we’ve been saying, these talks are in the early stages. We don’t know if anything will come of them. But what kinds of hurdles might such a partnership, between Lifespan and Care New England, face?

KRISTIN: Lots. There are many state and regulatory hurdles to clear. One concern might have to do with antitrust – would a partnership approach something of a monopoly?  The last time around, the organizations abandoned plans to merge after years of negotiations and wrangling with the state health department and attorney general.

ELISABETH: Kristin, just briefly, give us the larger context here. There’s been a lot of talk about mergers in health care recently.

KRISTIN: Mergers, consolidation, partnership – that is the way of the health care world right now. And Rhode Island is not immune. South County Hospital has, at different times, explored the possibility of partnering with another hospital system. CharterCare hospitals, including Roger Williams and Fatima, signed on with a California-based for-profit called Prospect Medical Holdings. Insurers have been merging like crazy – recent pairs include Anthem and Cigna, and Aetna and Humana. The question is: does all this consolidation lower prices for consumers? Or does it result in better care? Those are open questions, until we see where the chips fall.

The Pulse: How Does Hospital Consolidation Help, Or Hurt Patients?
The Pulse: How Does Hospital Consolidation Help, Or Hurt Patients?