Hospital Realignment

Currently, the nation’s health care landscape is shifting towards integrated systems and coordinated care, which necessitates hospital realignments (such as mergers) to create sustainable market conditions for hospital care and services. Although this shift has naturally been occurring within the health care industry, it has been further fueled by policies implemented through the Patient Protection and Affordable Care Act (ACA), which envisions a more efficient, value-based health care delivery and payment system.

This shift towards increased hospital realignment also is due, in part, to substantial public sector reductions in hospital funding, and therefore hospitals must adapt to changing economic and financial factors. The priority of any realignment is to keep hospitals open, preserve or expand patients’ access to care, and continue to provide consistent, quality care 24/7 to every patient that walks through our doors. By pursuing mergers and other realignment efforts, hospitals are able to maintain their presence in the community, and protect patient access to essential and quality care.

In January 2013, the Center for Healthcare Economics and Policy released a comprehensive analysis of hospital realignment studies, including 75 studies spanning the years 1996-2013, as well as 36 primary sources. The Center’s analysis outlines improvements in health care for communities that result from mergers, including:

  • Significant benefits to communities and patients in markets where hospitals remain open;
  • Preserved and expanded access to essential medical care;
  • Improved service offerings and quality of care;
  • Sustained and necessary investment in technology, facilities and health IT;
  • Sensible reduction in excess capacity; and,
  • More competitive health care markets.

The Federal Trade Commission and the Department of Justice have primary responsibility for ensuring that hospital realignments are in compliance with federal antitrust laws, including the Sherman Act of 1890, the Clayton Act of 1914 and the Federal Trade Commission Act of 1914. As the health care landscape shifts, these federal agencies are conducting public outreach to examine activities and trends that may affect competition in the evolving health care industry. They also are using their authority to review and approve or even unwind hospitals mergers, if necessary. As the health care landscape continues to evolve and the industry moves increasingly towards the goals of integrated care and coordinated health systems, the FAH will continue to engage in aggressive efforts to help shape the public conversation about health care competition and hospital realignment. It is imperative that this issue is put it in its proper context, which focuses more holistically on the total landscape and not just pricing impact.  

New Altarum Report Shows First-Ever Negative Hospital Price Growth

March 13, 2015 | FAH Hospital Policy Blog Team Category: Health Care Delivery, Realignment

Today, the Altarum Institute released its monthly Health Sector Economic Indicators Price Brief showing evidence of negative hospital price growth for Medicare and “other” payers. According to the report, January 2015 data indicate an overall negative hospital price growth for the first time ever.

The Altarum Institute’s monthly reports regularly reveal key insights into the health of health care and this month’s report reveals key news for hospital price growth:
“The big news is the first ever negative hospital price growth (-0.1%), along with the historically low hospital price growth for Medicare (-2.9%) and “other” payers (1.6%).”
The health care market showed a continued decrease in growth for Medicare and “other” prices:
“Medicare and Medicaid prices grew more slowly than “other” prices, which include private payment. Hospital prices for Medicare and Medicaid patients changed by -2.9% and -0.1%, respectively, down 2.2% from December for Medicare and down 0.5% for Medicaid.“
Further, the report’s negative hospital price growth data reconfirm the truth about hospital realignment, refuting the enduring misconception that hospital realignment leads to hospital price increases. As the report directly states:
“The long predicted hospital price growth due to consolidation is nowhere to be found!”

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Latest Altarum Institute Report Outlines “Remarkable” Hospital Prices Data

February 13, 2015 | FAH Hospital Policy Blog Team Category: Realignment

The Altarum Institute yesterday released its monthly Health Sector Economic Indicators Price Brief for February, which offers a year-on-year assessment of health care economics in 2013 and 2014. In particular, this report provides definitive proof of continuing slowed hospital care price growth and is a critical indicator of the reality of hospital realignment.

The headline of the Altarum Institute’s report notes that the growth rate of hospital prices is historically low:
“The big news for the month is the minimal hospital price growth—at 0.9%, the lowest rate since September 1998.”
The report also highlights the lowest price growth in Altarum’s records:

“Hospital prices for Medicare and Medicaid patients changed by -0.7% and 0.4%, respectively, down 1.4% from November for Medicare and up 0.5% for Medicaid. For other patients, price growth held steady in December at 2.0%. These three most recent readings…are the lowest since this series began in January 2002.”

The report concludes that the enduring trends of slowed—or in some cases negative—hospital price growth refutes long-standing misconceptions on hospital realignment, saying:
“This is remarkable, and for the time being, it should quiet those predicting higher prices emanating from hospital consolidation.”
This marks the second consecutive month Altarum has made this exact declaration to those who cling to the longstanding misconceptions of hospital realignment in the 21st century. In fact, Altarum has been a strong voice in commenting on the new reality of mergers and other transactions among health systems. In its December 2014 report, Altarum concludes:
“There is no evidence that provider consolidation is boosting hospital price growth.”
Since the Fall of 2014, we have witnessed a shifting tide among experts and health care professionals on the reality of contemporary hospital realignment. Decades-old data from the 1990s, used frequently by realignment critics, have been challenged by more current analyses that show, as one report states, “no consistent statistical relationship between hospital realignment and price increases.”

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New Report: “No Evidence” Of Provider Consolidation Boosting Hospital Price Growth

December 15, 2014 | FAH Hospital Policy Blog Team Category: Realignment

The Altarum Institute released its December monthly Health Sector Economic Indicators report December 12th, which includes key hospital price data, and an observation on what those data are telling us about hospital realignment. In its monthly assessment of key health care economic data points, the Altarum Institute is able to provide comparison of year-on-year changes in health care price indices, accounting for new information and trends, and offer insights on the state of the industry.

In this month’s report, covering data through October, there is a key conclusion on the impact of hospital realignment on hospital price growth—namely that there is no impact at all. As the report explains:
Medicare and Medicaid prices usually grow more slowly than “other” prices (which include private payment). Hospital prices for Medicare and Medicaid patients changed by 0.8% and -0.9%, respectively (down 0.7% from September for Medicare and up 0.3% for Medicaid). For other patients, price growth fell to 1.9%, from 2.4% in September (data not shown). This other rate, representing mostly private payment, is the lowest since September 1998. There is no evidence that provider consolidation is boosting hospital price growth.**
Altarum’s observation of no current evidence that hospital realignment is driving price growth echoes conclusions of a study conducted by the FTI Center for Health Care Economics and Policy earlier this year. In its meta-analysis of contemporary realignments, FTI found no consistent statistical relationship between hospital realignment and price increases.

The news from Altarum’s December report is the latest piece of evidence of a critical thought movement in health care. More and more, we are witnessing long-standing misconceptions on provider consolidation up-ended by fresh and current data. The old claims of realignments causing price increases and driving competition out of the market have been replaced by studies and empirical evidence pointing to the contrary.

Today, hospital realignment is recognized for increasing or maintaining access to health care, creating more competitive health care markets, and bringing significant new benefits to patients and the communities in which we operate. Meanwhile, insurers who rely on old 1990s data to criticize hospital realignment are themselves being scrutinized, as reports reveal health insurer consolidation continues to rise at disconcerting levels, allowing payers to create monopolies and increase their market dominance, to the detriment of consumers.

The headline from the December 12th Altarum report—“Lowest hospital price growth in 16 years pushes down health inflation” is reinforced by even more recent November 2014 data released by the Department of Labor’s Bureau of Labor Statistics (BLS). The BLS data show hospital prices grew only one percent in the past year, and speaks to the enduring health care spending slowdown, responsible for record-setting low price and cost growth across a number of key economic indices in health care. Hospitals continue to work diligently to protect patient access to care while implementing key structural changes that are credited with the spending slowdown trend.

As we close out 2014, it is clear the tide of public opinion has turned on the issue of hospital realignment. Efforts by providers to protect patient care and keep community hospitals open and thriving play an important part in the transformation of our nation’s health care system.

**: emphasis added

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