Journal of Healthcare Management - September/October 2014 - (Page 315)

IMPLEMENTNG HEALTHCARE REFORM Hospital Consolidation: "Safety in Numbers" Strategy Prevails in Preparation for a Value-Based Marketplace Jason Lineen, director, Healthcare Strategy, Navigant Consulting, Chicago, Illinois O ne of the most significant unintended consequences of the passage of the Affordable Care Act (ACA) in March 2010 has been the ignition of another wave of consolidation activity among U.S. healthcare providers. Similar to the industry's response to the threat of managed care in the mid-1990s, merger and acquisition (M&A) activity between multihospital health systems, stand-alone hospitals, large multispecialty medical groups, small independent physician group practices, and other provider organizations has accelerated dramatically in response to the ACA. According to Irving Levin Associates, the number of hospital mergers alone more than doubled between 2009 and 2012 (Creswell & Abelson, 2013). Tracking physician consolidation nationally is less precise, but Medical Group Management Association survey data suggest that the percentage of physicians working in practices owned by a hospital or an integrated delivery system increased from 24% in 2004 to 54% in 2012 (MGMA, 2013). At the end of the last wave of consolidation, by 2000, the overall percentage of hospitals in systems had increased from 38% to 52%. And since the Great Recession and passage of the ACA, nearly another 400 hospitals (10% of U.S. community hospitals) had joined multihospital systems and the percentage of hospitals in systems had increased to 62% by the end of 2013 (AHA, 2014). Additionally, these figures do not include the substantial number of "announced transactions" that ultimately were never consummated. For a variety of factors (cultural, political, legal, and regulatory), transactions between nontaxable entities are significantly more time consuming, unpredictable, and difficult to close than are mergers between taxable entities. In spite of the challenges of successfully executing merger strategies, it seems that nearly all hospitals and health systems, from organizations worth $100 million to those worth more than $1 billion, are asking, "Are we big enough to not merely survive, but to thrive, in the emerging postreform environment?" Intended to reduce the fragmentation of care delivery (thereby improving quality and reducing cost), the ACA has triggered market forces that are working to essentially flip the provider-side business model from fee-for-service (FFS) to value-/risk-based reimbursement models (e.g., accountable care/shared savings, bundled payments, partial or full capitation arrangements). This shift is akin to auto insurers telling auto 315

Table of Contents for the Digital Edition of Journal of Healthcare Management - September/October 2014

Journal of Healthcare Management - September/October 2014
Interview With Delvecchio S. Finley, FACHE, CEO of Harbor-UCLA Medical Center
Hospital Consolidation: “Safety in Numbers” Strategy Prevails in Preparation for a Value- Based Marketplace
Leveraging Women’s Leadership Talent in Healthcare
Pressure and Performance: Buffering Capacity and the Cyclical Impact of Accreditation Inspections on Risk-Adjusted Mortality
Development and Field Testing of a Self- Assessment Guide for Computer-Based Provider Order Entry
Good to Great: Using 360-Degree Feedback to Improve Physician Emotional Intelligence
Career Inflection Points of Women Who Successfully Achieved the Hospital CEO Position

Journal of Healthcare Management - September/October 2014