Providers have yet to slake their thirst for mergers—with several big-ticket megadeals dominating headlines in 2018—but experts warn that there’s unlikely to be an immediate payoff for patients.
And despite the fast pace of consolidation in healthcare, there are no signs of the merger trend slowing down going into 2019, especially as private equity investors have their focus squarely on the opportunities in the industry.
Some of the most notable deals of 2018 included the $28 billion merger between Catholic Health Initiatives and Dignity Health, forming one of the largest nonprofit systems in the country, and the ongoing regulatory review of the deal between Lahey Health and Beth Israel Deaconess Medical Center, which seeks to create a system in Massachusetts to rival giant Partners HealthCare.
For both deals, the involved health systems touted the potential financial benefits for patients. Lahey and Beth Israel said that having a challenger to Partners will significantly bring down prices in the greater Boston area.
But Ben Isgur, leader of PricewaterhouseCoopers' Health Research Institute, told FierceHealthcare that while the jury is still out on whether these deals will benefit for patients in the long-term, significant cost savings haven’t appeared in the short-term.
“Especially in the short-term, there’s not a lot of data out there that shows it will reduce costs,” Isgur said. “It’s a market play.”
Other experts have expressed the same concern, and in some cases, have warned that these deals could even lead to higher prices. In addition, a study released earlier this year suggests that the rapid pace of consolidation may pose a risk to patient safety.
Isgur said, though, that immediate benefits could play out in an improved patient experience and access to more convenient sites of care, such as urgent care centers or telemedicine from home.
Consolidation can also make it easier for providers to jump into the latest technologies, he said, by enhancing their workforce and bringing in additional money, which could pay off for patients more immediately, too.
And not everyone is convinced that patients are getting a raw deal amid the flurry of mergers. The American Hospital Association issued a report (PDF) earlier this month updating its dive into the benefits of merger activity, and it found that deals, by the benefits of scale, can lower capital costs and promote clinical standardization, saving hospitals $5.8 million.
The research, which was compiled by Charles River Associates, who interviewed leaders at 20 health systems, also found that mergers were linked with lower inpatient revenues, which would challenge the assumption that prices are on the rise, the AHA said.
“Data demonstrating that there are somewhat greater cost savings from such mergers, no increase in revenues and some evidence of quality improvements underscore the procompetitive potential of such mergers and their likely benefits for patients,” according to the report (PDF).
Though the debate on the benefits of these deals is ongoing, the continued pace of consolidation could bring more scrutiny from regulators, Isgur said. Big-name payer mergers have been highly vetted by the Department of Justice and other antitrust regulators, but provider deals have skated by a bit easier.
But as markets grow increasingly consolidated—in August, the Commonwealth Fund said that 90% of metropolitan areas were either “highly” or “super” consolidated provider markets—industry watchers expect to see authorities stepping in more frequently.
“I think it will just become kind of a natural occurrence over time,” Isgur said, “as markets get more consolidated, the last people to ask for a merger might get more scrutiny.”
Look back at the biggest provider deals of 2018 below: