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Trying to identify a ‘good’ hospital merger isn’t easy

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Leemore S. Dafny, Ph.D., and Thomas H. Lee, M.D., writing for the New England Journal of Medicine, look at the difference between good and bad hospital mergers.

“A ‘good’ merger or affiliation is one that increases the value of healthcare by reducing costs, improving outcomes, or both, thereby enabling providers to generate and respond to competition. The all-too-common alternative is a merger intended to reduce competition — to ensure referral streams (which would otherwise be earned through superior offerings) or to help providers negotiate higher prices and thereby avoid the difficult work of improving outcomes and efficiency.”

“Although regulators can sometimes stop a ‘bad’ merger, they cannot create a good one,” they note.

“The harsh reality is that it’s difficult to find well-documented examples of mergers that have generated measurably better outcomes or lower overall costs — the greater value that is publicly touted as the motivation underlying these combinations. The most consistently documented result of provider mergers is higher prices, particularly when the merging hospitals are in close proximity. Providers’ hopes for improving value by consolidating and then integrating care within merged entities remain objectives rather than accomplishments in most organizations.”




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