Updated Study From AHA Shows Hospital Mergers Saving Millions

The American Hospital Association (AHA) reaffirmed its previous findings that hospital mergers and acquisitions result in reduced healthcare costs and improve care quality.

In 2019, the AHA published its analysis of hospital mergers and noted the benefits that accompany them. The organization has recently updated its analysis to include data from 2018 and 2019, which includes 144 additional hospital mergers and acquisitions. The revisited study also allowed the AHA to look at past hospital mergers and analyze the effects over a longer period of time.

The overall analysis included 3,000 short-term acute care hospitals, 755 of which experienced an acquisition between 2009 and 2019.

The original report revealed that hospital mergers and acquisitions were associated with a 2.3 percent reduction in annual operating expenses per admission. The revisited results showed a 3.3 percent reduction in operating expenses.

The average annual operating expenses of the hospitals included in the data was around $292 million, meaning the average savings for acquired hospitals would amount to $9.5 million each year.

The report linked hospital mergers to a 3.7 percent decrease in revenue per admission, which equals $10.7 million saved per year. The updated results reaffirm the original findings of a 3.5 percent revenue decline.

The AHA report also associated hospital mergers and acquisitions with improved patient outcomes and care quality. Compared to non-acquired hospitals, acquired hospitals had a statistically significant reduction in inpatient readmission rates. The composite outcome measure of quality which incorporates readmission and mortality rates also showed an improvement in care quality.

The AHA gathered the cost and revenue data from CMS’s Healthcare Cost Report Information System and measured quality using CMS metrics in the Hospital Compare database.

Despite the AHA’s continued insistence that hospital mergers lead to reduced costs and better care quality, there is an abundance of data that contradicts these claims.

The National Bureau of Economic Research (NBER) has published several analyses over the last few years that highlight how hospital mergers actually increase healthcare costs. One analysis by Harvard and Princeton researchers looked at data between 1996 and 2012 and found that cross-market, within-state hospital mergers lead to cost increases between seven and nine percent.

Another NBER analysis looked at 366 hospital mergers that occurred between 2007 and 2011 and found that costs increased by more than six percent when the merging hospitals were five miles or less apart. Researchers also found that prices at monopoly hospitals were 12 percent higher compared to hospitals in markets with four or more rivals.

Healthcare mergers and acquisitions can also lead to physician burnout, athenhealth’s Physician Sentiment Index 2021 report revealed. Mergers can bring uncertainty, organizational changes, and disruptions in workflows, which do not always prove ideal for providers.

Physicians who experienced an acquisition reported that they felt less safe and supported by their workplace, less inspired to go above and beyond in their work, and less positive about collaborating with colleagues, the report noted.

Another study from Rice University and Blue Cross and Blue Shield of Texas (BCBSTX) revealed that healthcare costs increased when hospitals acquired physician practices. Prices were 5.6 percent higher for patients who saw a physician in a hospital-owned practice.

However, the AHA remains steady in its claim that hospital mergers benefit health systems. The report referenced increased scale and establishing more standard processes of care—two changes that accompany an acquisition—as factors that help improve care and lower prices for patients.

“With these factors in place, hospitals are better able to make the necessary infrastructure and information-technology investments that the modern healthcare system demands while also controlling costs, allowing for higher quality care at lower cost,” the report concluded.

“Our updated econometric analyses continue to indicate that through hospital acquisitions, hospital systems have been successful in reducing costs, lowering expenditures, and improving quality.”