Hospital Mergers May Actually Reduce Costs

A new report authored by Charles River Associates presents evidence that hospital mergers – often described as harmful to competition – may in fact reduce healthcare costs and improve the quality of care.
The study found that mergers can help struggling hospitals achieve savings through coordinated purchasing of supplies and investments in expensive health IT upgrades, among other benefits. Charles River found that due to increased scale, acquisitions can reduce a hospital’s annual operating expenses by 2.3%. Not only are costs reduced, but revenues are as well, the study found, meaning that “savings that accrue to merging hospitals are passed on to patients and their health plans.”
On the quality side, Charles River found that hospitals that merged showed statistically significant declines in readmission and mortality rates. The study highlights how scale is critical to maintaining and enhancing the infrastructure necessary to address social determinants of health, adopt population health strategies, and promote value-driven care.
The study is especially timely for Massachusetts. The Health Policy Commission, meeting this Wednesday, September 11, has announced that it is undertaking its own retrospective review of the material changes and mergers that have occurred in the commonwealth to help determine if they have resulted in the cost savings and improved quality that the applicants have predicted.