Hospital consolidation: 5 survival tactics
To achieve scale economies, large hospitals and healthcare systems should shift toward integrated organizations with standardized procedures and systematically reduced costs.
The wave of U.S. hospital mergers over the past two decades has failed to deliver on promised economies of scale, according to a new
Kaul“The key finding of this report is that mangaement in healthcare delivery organizations have not done all they could do to wring efficiencies out of their operations,” says report coauthor Anil Kaul, a principal at PwC. “In many cases they have gone through acquisitions to plug gaps in their portfolio or increase their market share to put them in a better negotiating position with payers.”
Consequently, they have been able to withstand the reduced reimbursements from Medicare/Medicaid by making only minimal adjustments to their cost structures, according to Kaul.
“Only continued pressure from reducing reimbursements will force health systems to make the required tough choices to realize the potential of the scale benefts inherent in their systems,” he says.
On the flip side
PrabhaManaged care executives are the flip side of the equation, believes K. R. Prabha, coauthor and director at PwC. “While the transformation will have to be performed entirely by the care delivery organizations, managed care contracting could be the impetus for this transformation through rates and incentives,” she says.
For example, payers could play a significant role in influencing care delivery choices with the proverbial carrot and stick approach, according to Prabha.
“They could force a care delivery system to make portfolio choices through more restrictive payment policies-the stick-that route care to the most efficient site of care/providers,” Prabha says. “Similarly, they could incent-the carrot-care delivery standardization within a service line across a healthcare system.”
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