The unintended consequences of healthcare system integration

Recently I have been working with healthcare organizations in the Northeast Corridor—hospitals, physicians and ancillary services—helping them adjust to the seemingly ubiquitous consolidations of systems. In New Jersey, there may soon be two mega-systems: the St. Barnabus/Robert Wood Johnson merged system and the Meridian/Hackensack system. Andrea J. Simon Approximately 65 percent of all inpatients will be absorbed by one of these two consolidations. For residents of New Jersey, that leaves only seven other hospitals. For ancillary service providers, this means they aren’t sure if they will be in business.

Similarly, in Connecticut, Yale-New Haven Hospital has been acquiring hospitals and physicians, causing a good deal of disruption for the remaining providers, confusion for consumers, and concern among home health providers, visiting nurses, special purpose centers and others.

Big consolidations are having big consequences

There is certainly no shortage of literature on the expected and unintended consequences of these big system integrations across the U.S. After the Affordable Care Act was passed in 2010, responses came slowly at first and then swiftly. The expectation was that there would be better patient care, improved care coordination and reduced overuse of services, if not lower costs.


Kent Bottles, M.D. wrote about the topic in his 2013 Hospital Impact post, “Beware unintended consequences of hospital-doc integration.” His concluding points are important:

“...predicting the future can be difficult even when the conventional wisdom presents a vision and theory that makes logical sense. Unfortunately, when humans are involved things often get messy and irrational. Humans make decisions based on financial and emotional considerations. Humans often change their minds.

By 2015, we could already see the consequences. Jake Millerwrites about the unintended consequences of consolidations in Harvard Medical School News:

So far, a new study by researchers from Harvard Medical School’s Department of Health Care Policy has determined, this type of provider consolidation has led to higher prices with no evidence of offsetting reduction in the use of care. The findings, published in JAMA Internal Medicine, suggest that integration between physicians and hospitals strengthens their bargaining position with insurers, particularly for prices of outpatient care, but has not led to more efficient care.”

Now, well into 2016, and from our perspectives as corporate anthropologists, we wanted to share what we are seeing from the “field” perspective.

These changes are not going away, so we must understand what they mean

Overall, in the next series of blogs we want to discuss several themes:

  1. Consumer behavior is changing. Consumers have more deductibles but higher costs and less choice—yet they are still trying to choose their healthcare.
  2. Physicians are adapting, sort of. Some physicians are still trying to stay independent but are losing their uniqueness in the eyes of their patients and their colleagues.
  3. New delivery channels are thriving. New delivery channels, such as urgent care centers, retail clinics and even telemedicine, are creating new options without the “medical home” or coordination that was expected to reduce costs and improve outcomes.
  4. Independent physicians are struggling. As referrals are shifting to in-system networks, independent physicians are finding their panels shrinking and have limited experience in marketing or growth strategies.
  5. Some ancillary services are being cut out of the system. Ancillary services—from nursing homes to visiting nurses to back-office support companies—are finding their referral streams truncated. Their value propositions no longer have their former value.
  6. Lower costs have not resulted. What this means for consumers and insurers is not yet clear. For systems, however, there are immediate financial benefits as they add facility fees onto charges that used to be done by physicians.

Consumers are driven by, and are driving, change

True, today’s healthcare consumer is becoming a more educated user of healthcare services. How are they actually doing that? By taking advantage of readily accessible data and information that allows them to have open conversations with their doctors about diagnosis and treatment options.

This all sounds great, but what we have heard in our research and seen in the market suggests there are some unintended consequences:

  • Angry doctors. Angry doctors kept telling us that they couldn’t convince patients to get X-rays and lab work at the location they recommended. In fact, they couldn’t convince them to get the services at all. Patients didn’t agree that they needed them. And they wanted to shop for better prices. The ability to provide the patient with the right options has become more limited by the system. For both the patient and the doctor, the issue is, “who is in charge of my health, and my money?”
  • Commoditization of physicians. Rapid growth in urgent care centers has provided our clients with a new base of patient/customers. These patients have different expectations. They aren’t going to sit and discuss their care options—they want speed, ease and quality of care without a relationship with a doctor. Indeed, they believe urgent care centers and the doctors inside them are “all the same.” They feel that all doctors practice “evidence-based medicine.”
  • Lack of patient loyalty. While it is assumed that a system consolidation should not generate patient disruption, we’ve actually been seeing three things: patients are indeed searching for options beyond their previous doctors; and patients whose hospital is not part of a system are having to pay more to see their previous doctors who have been acquired or joined a system and may be out of network now. These patients are angry; and patients are using the Internet with greater ease and speed to find solutions for care that fits their time schedule and at a place that’s convenient for them.

These changes are not going away. How physicians are adapting to them will be the subject of our next blog. Stay tuned.

Andrea J. Simon, Ph.D., is a former marketing, branding and culture change senior vice president at Hurley Medical Center in Flint, Michigan. She also is president and CEO of Simon Associates Management Consultants.