Mergers and acquisitions continue to be a hot topic in the healthcare industry as M&A activity rises and the government flexes its regulatory muscle, but amid all the developments it's important to note that not all mergers are created equal.
A "good" merger is one that allows providers to increase healthcare value to the benefit of the community, whereas a "bad" merger is the type that regulators have increasingly sought to prevent or dismantle--one that discourages competition, write Leemore S. Dafney, Ph.D., and Thomas H. Lee, M.D., in an opinion piece for the New England Journal of Medicine.
But while good mergers can help the healthcare industry transition to value-based care by allowing providers to pursue collaborative care models, providers have shown little to no hard evidence that their mergers have actually lowered costs or improved outcomes, the authors say.
In order for a merger to be deemed helpful to consumers, the benefits have to outweigh the anti-competitive costs--what the authors call cognizable efficiencies, Dafney said in an accompanying audio interview with NEJM Managing Editor Stephen Morrissey.
"A lot of what merging providers think of as the efficiency benefits of their transaction can take place without a merger," she said. "If you're going to, say, take best practices from one provider and translate that into your own facility, is it the case that you need to merge to do that? And really how much of those best practices could be achieved using a consultant or by having some sort of a joint venture possibly?"
Dafney and Lee further deconstruct the difference between cognizable and perceived efficiencies in a table that accompanies their opinion piece. For instance, when providers say a merger can help them improve patient outcomes, they should quantify these projected improvements, compare them to what they could achieve without the merger and ideally, make these outcomes available to the public, the authors wrote.
It can be difficult to identify cognizable efficiencies that could result from a planned merger, but if providers do not try to do so, they may never achieve the value-boosting benefits, the authors write.
"Proposed mergers may threaten robust competition--but they could also be moments of opportunity, which, if seized, could help providers make major advances in their ability to compete on outcomes and costs," they write.
To learn more:
- read the opinion piece
- here's the interview
Related Articles:
Hospital M&A was strong in first quarter
When mergers and acquisitions go wrong [Special Report]
Hospitals go big to take on population health management
3 ways realignment can help hospitals
FTC's antitrust strategy: Unwind completed mergers and acquisitions
Ninth Circuit St. Luke's decision ignores the American healthcare transformation