Strength through integration?

By Sue Ter Maat
American Medical News, February 11, 2013

For the sixth year in a row, Moody’s Investors Service is issuing a “negative outlook” to nonprofit hospital finances. Yet the bond-rating agency notes that the facilities have collectively improved their bottom lines in recent years.

In part, Moody’s said, the unexpected gains have come because of physicians. Closer relationships with physician practices, including outright acquisitions, have helped hospitals stabilize their market shares and find ways to cut costs, Moody’s said. “The theme is for tighter and closer alignment and integration [of doctors] with hospitals,” said Lisa Martin, senior vice president of Moody’s Healthcare Team.

Nonprofit hospitals’ three-year compound annual growth rate of revenue fell from 7.3% in 2008 to 5.4% in 2011, Moody’s said. The measure looks at changes over the previous three years and assigns an average annual value to them.

But hospitals have taken positive steps that have prevented an even greater negative impact, Martin said. Among them are mergers and acquisitions of other hospitals, long-term care facilities and physician practices. These forces have meant that doctors are being drawn more closely into hospital operations and decision-making through joint ventures and hospital board memberships, especially as more doctors are employed instead of working in their own practices, she said.

Mergers and acquisitions are expected to continue through 2013 and 2014, as hospitals prepare for full implementation of the ACA. Moody’s analysts consider this activity positive, because it has led to consolidation of services and reduced expenses.

But Moody’s warned that mergers and acquisitions could be difficult in the short term because of turnaround challenges at takeover targets, merging cultures and difficulty closing services after mergers.

http://www.ama-assn.org/amednews/2013/02/11/bisc0211.htm?utm_source=nwltr&utm_medium=heds-htm&utm_campaign=20130211

Comment:

By Don McCanne, M.D.

Consolidation. Mergers. Acquisitions. Between hospitals. Between physicians. Between hospitals and physicians. Between physicians and insurers. Within a framework of integrated affordable care organizations.

Our political leaders’ decision to choose a market model of health care reform led by private insurers is resulting in the shutting down of whatever minimal semblance there was of a free market between competing health plans, as we convert to health care delivery oligopolies and monopolies.

Does anyone really believe that the private insurers are going to be able to drive costs lower and quality higher by their market skills in leveraging the forces of competition between health care delivery systems? The insurers already understand that this model is fading rapidly. That is why they are involved in designing managed care products that shift the insurance risk to others while greatly expanding their market in administrative services. Plus they are gaining control of sectors of the actual health care delivery system.

Our policy experts say, “Yes, but by establishing accountable care organizations, this is the way that we can start to pay for quality instead of volume.” Accountable to whom? Not the patients nor the taxpayers.