Hospital mergers don't guarantee financial benefits

An impending report by Booz & Company studying the success of hospital mergers may raise some eyebrows of those who have been advocating greater consolidation.

Booz examined 220 hospitals that were acquired between 1998 and 2008--about one-third of all hospitals deals that transpired during that time period. According to its data, only 41 percent of those hospitals outperformed their market peers, HealthcareFinanceNews reported. The tax status of the hospitals involved did not make much of a difference

Moreover 18 percent of the hospitals that had positive margins prior to their acquisitions moved into negative margins.

There were some stark differences between the size of the acquirer and the performance, however. Properties acquired by systems with 15 or more hospitals outperformed peers 51 percent of the time, versus a 34 percent outperformance rate among those acquiring systems with less 15 hospitals, "suggesting some support for scale," the report said.

The report also concluded hospitals that raise their discharges and occupancy rates are much more likely to outperform their peers. Forty-nine percent that increase discharges post-transaction outperform, versus 33 percent whose discharges decrease or show no change. It's 44 percent versus 38 percent among hospitals that increase their occupancy rates.

The report, which is expected to be released to the public in a few weeks, is being developed as more hospitals enter into mergers, spurred by the Affordable Care Act and shrinking margins for smaller providers. Deals in recent days include Harrison Medical Center in Washington State merging with Franciscan Health System, and the preliminary merger between Trinity Health and Catholic Healthcare East.

For more information:
- here's the HealthcareFinanceNews artice
- read about the Harrison Medical Center merger
- read about the Catholic Healthcare East, Trinity merger