Henry Ford-Beaumont merger to create modest leverage

Experts believe the pending merger between the Henry Ford Health System and Beaumont Health System could lead to cost savings for the Detroit-area hospital operators, although those chances appear uneven at best, reported Crain's Detroit Business.

The two hospital systems announced their plans for a merger last week, with the hope of creating the Wolverine State's largest hospital system by the middle of 2013, according to Crain's. It would include some 40,000 employees and $6.4 billion in annual revenue.

The changes being ushered in with the implementation of the Patient Protection and Affordable Care Act mean the systems will be treating more insured patients in the coming years, requiring more streamlined and efficient systems of providing care, the Detroit Free Press reported.

However, observers say the leverage the new system could exert would be modest, with the expectation that it could extract price increases of 1 percent to 2 percent from payers, Crain's reported.

"A larger hospital entity prevents the managed care plans from driving rates too far down, but I don't see Henry Ford-Beaumont having enough leverage to drive prices up that much," Joshua Nemzoff, president of Nemzoff & Co. LLC, in New Hope, Pa., told Crain's.

For more:
- read the Crain's Detroit Business article
- check out the Detroit Free Press article
- here's the merger announcement