- Reports of Healthcare IT Infrastructure Vulnerabilities Surge 341%
Second, even after the data warehouse and IT infrastructure have been developed, there is a need for continuing effort and expenditure to ensure that all relevant information is consistently uploaded across the health system.
Third, a bigger organization can support more advanced analytical capabilities because the analytics can be used to improve quality and lower costs for more patients and because a larger database permits more sophisticated and targeted analyses.
Hospital acquisitions have led to across-the-board decrease in costs, resulting in a 2.3 percent reduction in annual operating expenses at acquired hospitals, according to the report based on econometric analysis and interviews with 10 leaders from hospital systems.
Acquisitions have also resulted in “statistically significant” reduction in the rates of patient readmissions and mortality.
The recently published report is an update to one done by Charles River Associates for AHA back in 2016, which also looked at the impact of hospital acquisitions through econometric analysis and interview with leaders from 20 hospital systems.
“Even more pronounced than three years ago is the key role played by sophisticated data-based analytic tools that rely on an information technology (IT) infrastructure. These tools incorporate extensive clinical and financial data from all components of the health care system and are costly to implement and operate,” the 2019 report related.
“While these tools are critical in the increasingly data-driven approach to clinical and cost standards of care and the development of targeted treatment approaches, the scale and investment needed to develop them further enhances the need for scale,” it added.
Health system interviewees said they save between 1.5 percent and 3.5 percent in total expenses as a result of hospital mergers.
“Pressures to deliver cost-effective, value-based care continue to develop, resulting in an increasing need to gain scale and scope. The ability to take financial responsibility for the total cost of patients’ care requires both volume and scale to mitigate risk and coordinate the continuum of health care services that patients require,” the executive summary of the AHA report observed.
Studies Question Benefits of Hospital Acquistions
Not everyone shares AHA’s enthusiasm for hospital mergers and acquisitions. For example, a recent study by PwC’s Health Research Institute (HRI) projected that medical costs would increase 6 percent in 2020, fueled in part by healthcare megamergers.
“HRI identified provider megamergers and physician employment and consolidation as drivers of price and in turn medical cost trend,” drivers that are expected to continue in the short term, the study noted.
A report by the National Bureau of Economic Research found that cross-market hospitals charge higher prices after they merge, suggesting that the reduced competition from the merger enables hospitals to charge higher prices regardless of cost savings.
“The theoretical and empirical analyses in this study illustrate that at least some of the mechanisms by which cross-market hospital mergers generate price increases are related to a diminution of competition among the merging parties for inclusion in insurer networks, and are therefore relevant for antitrust enforcement,” the report concluded.
