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Simone's OncOpinion: Health Care Consolidation—Too Big to Fail?

Simone, Joseph V. MD

doi: 10.1097/01.COT.0000408538.33505.07


The consolidation of health care practices, hospital systems, and academic medical centers with each other is proceeding with increasing speed. Alliances that would have been improbable a few years ago seem to be consummated almost daily. This process, especially in metropolitan areas, has led to fewer and larger independent systems, which is, of course, the whole point of the exercise. Dominance in a region gives the mega-systems more leverage when contracting with insurers, gaining market share and purchasing power for supplies and services, and, most important, control for virtually every step in a patient's complex and sometimes frustrating journey through the health care system.

What about those organizations that remain independent of these movements? Some can withstand the urge to merge because of a strong reputation, a particularly advantageous financial environment, and/or an efficient system. Others, including smaller private practices as well as hospitals and academic medical centers of marginal profitability, must find other solutions, such as selling their hospital or practice (or leasing or turning over operational control) to a strong health system; the University of Minnesota years ago and Loyola University in Chicago more recently are institutional examples, and private practices too numerous to count have become employed by hospital systems or joined increasingly large practices.

One might assume that this would be good for patients in convenience, medical outcomes, and a lower cost for care. That may be true, at least in part, for large and long-standing systems, such as Kaiser Permanente, the Geisinger Clinic, Virginia Mason Medical Center, and the Mayo Clinic. But as yet, that is an unproven assumption for those that consolidated in the past decade or so.

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First Key Question

The first key question is whether these changes are or will be good or bad for patients. For the more recent consolidations, there is little data to go by, but we may speculate based on other experiences. The institutions with large, long-standing integrated systems, such as the examples given above, certainly perform well by many important parameters. But that did not happen overnight. The medical landscape is quite different today from when they started, but they have managed to remain nimble and adaptable while raising the level of quality and efficiency.

So it certainly is possible for the newcomers to do as well. But at this relatively early phase of development, practices and facilities have been added by accretion on the main campuses as well as in outlying consolidated facilities rather than by organic growth. This often impairs the efficiency and convenience of the patient experience with long distances between services such as imaging, medical ambulatory care, radiation oncology, and parking. The huge size of some of these campuses can appear to be a maze for patients, and medical facilities have never been known for excellent signage.

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Zero Sum Game?

The other handicap, especially in academic medical centers, is that some leaders of these systems sometimes view choosing sites for development as a zero sum game—e.g., if we build in the outer circle of the city because paying patients live there, we cannot afford to keep the home base up to date and competitive at a progressively higher and more competitive level.

In fact, the goal of the outlying areas is to maintain market share and a good payer mix. An academic center builds its stature on novelty, innovation, and research, which requires major investments to build and sustain. Thus, an academic center may grow market share at the expense of investment in research, allowing the stature and attractiveness for recruiting the best talent to be compromised.

For some of these mega-systems, growth seems to be the primary goal, on the theory that they will be so big and dominant, one might say monopolistic, that they must succeed and prosper and cannot be seriously challenged.

But increasing size beyond a certain functional and organic point has its risks. Medicine, and academic medicine in particular, is a team sport and it is not a simple task to keep personal communication open and relatively easy. Failing this, departments or divisions or cliques of doctors or scientists can become virtually independent of the ebb and flow of institutional activity. Thus, efficiency, institutional loyalty, and job satisfaction can be impaired dramatically.

Furthermore, as the current recession has shown, large size can be a serious handicap in times of radical change in the institutional environment. Practices have gone under because of the cuts in reimbursement, hospitals have been seriously wounded when large, important specialists groups have been lured away, and academic centers have taken a dive when state funding or grant revenues or clinical revenues have suffered major losses due to the economy or a leadership change.

While the rapidly expanding mega-consolidates may not go under overnight or fail completely, when they are bleeding in the water due to extending their reach beyond a manageable and efficient size, there will be sharks all around ready to take a bite out of them. Also, it is only a matter of time before the Treasury Department begins to question the nonprofit status and monopolistic market practices of those institutions.

No institution, medical or otherwise, is safe from mortal wounds or outright failure due to excessive expansion. To believe otherwise is hubris.

© 2011 Lippincott Williams & Wilkins, Inc.
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