In a recent blog post, Paul Levy, former CEO of Beth Israel Deaconess Medical Center in Boston, discussed some of the potential negative implications of increased merger and acquisition activity among hospitals and health systems.
In the post, he writes that this increased consolidation is driven "by a belief that the payment system will change in a manner that will reward the ability of providers to manage the continuum of care, with a form of payment in which the risks of meeting some form of capitated annual budget will fall away from insurers and more to providers."
However, he argues there are three underlying issues why increased consolidation is not the best way to redesign the healthcare delivery system for success under capitation.
1. Hospital leaders aren't prepared to run big systems successfully. According to Mr. Levy:
2. The business benefits of a merger are very difficult to realize. According to a study by McKinsey, approximately 70 percent of mergers fail.
3. The benefits of a merger can be achieved with an alliance. A strategic alliance also protects the culture of each individual institution, argues Mr. Levy.
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In the post, he writes that this increased consolidation is driven "by a belief that the payment system will change in a manner that will reward the ability of providers to manage the continuum of care, with a form of payment in which the risks of meeting some form of capitated annual budget will fall away from insurers and more to providers."
However, he argues there are three underlying issues why increased consolidation is not the best way to redesign the healthcare delivery system for success under capitation.
1. Hospital leaders aren't prepared to run big systems successfully. According to Mr. Levy:
"There is little in the training of people who have become CEOs of single hospitals to run groups of hospitals and associated physician practices. By the time they (or their boards) figure out what they don't know, they have wasted millions and reduced the overall effectiveness of the component organizations within the system."
2. The business benefits of a merger are very difficult to realize. According to a study by McKinsey, approximately 70 percent of mergers fail.
3. The benefits of a merger can be achieved with an alliance. A strategic alliance also protects the culture of each individual institution, argues Mr. Levy.
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