When an independent hospital is acquired by a multi-hospital health system, costs are generally reduced by cutting support staff and prices typically increase. Regardless of ownership status, hospitals tend to raise prices after acquisition, especially when joining a health system in the same market, but the effect on care quality still needs further investigation, according to a University of Pennsylvania study published Sept. 23 in the Journal of Political Economy Microeconomics.
Eight things to know about the study:
1. In 2020, multihospital systems controlled 81% of U.S. hospital beds, up from 58% in 2000. This growth, driven by the acquisition of standalone hospitals, may lower costs through centralized resources and increase bargaining power with payers. However, it's unclear if these financial gains benefit payers or affect care quality.
2. Researchers from UPenn's Leonard Davis Institute of Health Economics in Philadelphia analyzed patient data to explore how corporatization affects costs, prices and patient outcomes at acquired hospitals.
3. The study found that acquired hospitals increased profitability by $14M a year, primarily by cutting staff in non-patient-facing roles. Of the $11.2 million in reduced costs, 60% came from job cuts. Efficiency improved only after initial acquisitions, while hospitals switching between systems saw no such gains, likely because they had already optimized operations.
4. After corporatization, average inpatient prices grew by up to 11%, depending on the reason for hospitalization. On average, prices per hospital stay increased by $856, according to the study. Prices also increased for system-owned hospitals acquired by other systems.
5. After analyzing quality measures of hospital readmissions, mortality and patient satisfaction, researchers found that corporatized hospitals had higher 90-day readmission for commercially insured cardiac care patients than independent-remaining hospitals. Readmission increased linearly with hospital staff cuts. Although only one measure, readmission results suggest potentially poorer short-term quality after initial acquisition. Other metrics did not significantly change, according to study authors.
6. Researchers found that iInitial corporatization boosts efficiency and revenue through staff cuts and price increases. However, the study found no efficiency gains from acquiring already system-owned hospitals or from system mergers, likely due to existing optimization. All acquired hospitals raised inpatient prices.
7. Rising 90-day readmissions after corporatization suggest possible declines in care quality, potentially linked to staff cuts affecting support services that prevent readmissions.
8. While multihospital system growth could reduce costs and improve affordability, this depends on whether savings reach payers and consumers. Further research is needed to assess how corporatization impacts costs and care quality, helping regulators safeguard patient outcomes.
Editor's note: Data on hospital ownership, finances and personnel were from the American Hospital Association. Patient-level data on payments and outcomes were from Elevance Health claims for people with employer-sponsored insurance, and from Medicare Advantage plans in 20 states. Methods allowing causal estimates analyzed 101 hospital acquisitions from 2013-2017 in a matched comparison of acquired versus independent-remaining hospitals.
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