Hospital Consolidation Isn’t the Key to Lowering Costs and Raising Quality
Authors: Austin B. Frakt
Journal: JAMA (2015)

The headline of a mid-September op-ed in The Wall Street Journal by Kenneth Davis, MD, CEO and president of Mount Sinai Health System in New York City, trumpeted a familiar claim: “HospitalMergersCanLowerCosts and Improve MedicalCare.”But largersize isneitheranecessary nor sufficient condition for hospital systems to trimwaste and enhance quality. In fact, studies show that greater competition,not consolidation, ismore likely tohold down costs and lead to better care. Davis says that largerhospitals andhospital systems reducecosts and improvecare in several ways. For instance, he suggests that integrated systems can share top physicians and other resources, including electronic medical records that could bemined for clues to improve quality. They also have thepotential to remove regional redundancies, like 2 kidney transplant centers operating in closeproximity. Furthermore, eliminating duplication can help enhance hospitals' ability to cross-subsidize unprofitable services that benefit the community, suchaspediatricandpsychiatriccare that relies heavily on lowMedicaid payments. In July, JAMA published an article in whichThomasC.Tsai,MD,MPH,andAshish K. Jha, MD, pushed back against some of these claims, arguing that hospital consolidation is not necessary to achieve the kinds of benefits Davis suggested. “Consolidation is not integration,” they write. Health information exchanges can achieve clinical data-sharing benefits without consolidation, for example. Perversely, larger hospital systemsmay bemore likely to opt out of such data-sharing arrangements, assuming they capture most of their patients' clinical information. Bigger may not be better. Tsai and Jhaalso remindus that there is little evidence that consolidated hospitals improvequality. They argue that quality improvement comes not from size, but from leadership. Smaller institutions can implement inexpensive but highly effective quality improvements,suchassurgicalchecklists, as well if not better than larger organizations can. Finally, Tsai and Jha write that evidence suggests that competition, not consolidation, is associatedwith higher quality. A deeper dive into that evidence is found in a 2012 Robert Wood Johnson Foundation evidence synthesis by Martin Gaynor, PhD, andRobertTown,PhD. Ina thoroughexamination of the research literature, these scholars foundthat, ingeneral, hospital consolidation leads to higher prices (often exceeding 20% in very concentrated markets) and reduces quality. In short, hospital consolidation is neither sufficient nor necessary to lower costs and raise quality. Davis concludes his Wall Street Journal op-ed (Kenneth L. Davis Hospital mergers can lower costs and improve medical care. Wall Street Journal. September 15, 2014 http://www.wsj.com/articles/kenneth-l -davis-hospital-mergers-can-lower-costs -and-improve-medical-care-1410823048) suggesting that this time is different. [T]he fear that mergers curtail competition, leading to higher prices for medical care, reflects an old way of thinking that doesn't account for the introduction of population-health management. This line of thought ignores the fact that health-care delivery has become more efficient. Health care has changed, too: Medical advances mean that people recover from serious illness and injury faster and live longer, healthier lives. Hospital mergers are the way to promote these positive trends while delivering highquality, better-coordinated care, improving efficiency and rooting out unnecessary costs.