You may have noticed that your local, independent hospital has either been taken over by a larger, regional health care system or has closed its doors altogether. The consolidation of hospitals in the United States is expected to increase in the coming years, especially influenced by the financial incentives contained in the Affordable Care Act (Obamacare) (the Affordable Care Act reduces the growth of Medicare hospital reimbursement by approximately 1.5% annually).
The smaller, independent hospitals have been gobbled up by locally integrated health systems that are often associated with larger, academic medical centers (now, the typical region in the United States has 3 to 5 consolidated health systems; there are approximately 135 academic health centers in the United States).
Between 1981 and 2011, hospital use declined by 33% despite a growing and aging population, due in part to technological innovations and economic considerations (hospitals are more expensive than ambulatory surgery centers or outpatient facilities). During the same period, the number of short-term acute hospitals declined (more than 15% of hospitals closed). From 2007 to 2012, there were 432 hospital merger and acquisition deals that involved 835 hospitals.
Now, 60% of hospitals are part of health systems, an increase of 7% from a decade ago, with the average local health system having 3.2 independent hospitals.
Now, 60% of hospitals offer home health services, while 37% of hospitals own skilled nursing facilities, 62% own hospice services, and 15% provide assisted living options.
The top 3 share leaders in a hospital referral region (“HRR)”) account for 77% of hospital admissions, on average. The top 5 hospitals or systems account for 88% of hospital admissions. The typical hospital market in the United States has 1 dominant system, 2 to 3 smaller systems, and a residual of smaller institutions.
No hospital markets in the United States are considered highly competitive: almost half are highly concentrated, an additional one-third are moderately concentrated, and the remaining one-sixth are not concentrated.
Physician practices have also been affected by hospital mergers: from 2004 to 2011, hospitals have increased their ownership of physician practices from 24% of physician practices in 2004 to 49% of physicians practices in 2011.
Additional Factors Leading To Hospital Consolidations
As advanced medical treatments become more sophisticated and expensive, they become increasingly concentrated in fewer inpatient institutions. Many large teaching hospitals that focus on research and education may offer more innovative treatments that are attractive to patients. Large teaching hospitals typically have greater endowment and revenue streams than smaller hospitals, which make the large teaching hospitals a valuable source of capital when smaller hospitals need to invest in their facilities, equipment, or information systems, resulting in additional pressure placed on smaller hospitals to merge with larger hospitals.
Some possible positive effects of hospital consolidations: large health systems may be able to provide higher quality care (studies have shown a clear relationship between volume and outcome for many surgical procedures) and large health systems may result in cost savings (while some studies show cost savings after a consolidation, the savings require significant integration of different parts of the health system, which does not always occur).
Does the type of hospital ownership make a difference in cost savings? It appears that it does not – prices are just as high in nonprofit health care systems as in for-profit health care systems.
If you or a loved one may have suffered serious injuries as a result of negligent hospital care, you should promptly seek the advice of a local medical malpractice lawyer in your state who may investigate your hospital malpractice claim for you and represent you in a medical malpractice claim against a hospital, if appropriate.
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