Environmental assessment explores impact of consolidation in the healthcare industry

Healthcare organizations will be challenged to prove that the changing healthcare landscape has created an environment in which consolidation actually improves value to consumers. That is the conclusion of Health Care 2020: Consolidation, a new report published by the Healthcare Financial Management Association.

“Consolidation is a trend that’s here to stay,” says HFMA President and CEO Joseph J. Fifer, FHFMA, CPA. “But controversy about the impact is ongoing. In many cases, consolidated entities have not demonstrated value to the communities served. Across the industry, the challenge going forward is to achieve and demonstrate higher value from consolidation by lowering the total cost of care and improving quality.”

This is the third in a series of four reports that comprise an environmental assessment designed to guide healthcare organizations in their strategic planning efforts over the next several years.

To download Health Care 2020: Consolidation, visit hfma.org/healthcare2020.

Key takeaways in the 18-page report include the following:

  • Hospital and health system consolidation will continue to build, significantly remaking the delivery system landscape over the next decade.
  • Small, independent physician practices increasingly are becoming an endangered species as the healthcare industry’s transition from volume to value gains steam.
  • Regardless of whether pending mergers are allowed to proceed, the health insurance sector will remain highly consolidated for the foreseeable future.
  • While post-acute facilities are consolidating, hospitals and health systems are generally not the buyers.
  • Although rulings at the district court level earlier in 2016 dealt the Federal Trade Commission some temporary setbacks, reversals by appellate courts mean that the FTC is likely to keep a close eye on proposed health system mergers.
  • Although hospital consolidation historically has not added value from the consumer’s perspective, emerging value-based payment systems and an increased emphasis on price transparency may motivate merging organizations to pass along their savings.

In addition to providing background and context for these key messages, the report also identifies several organizations to watch for their strategic approach to alliances with other organizations, including Catholic Health Initiatives and Dignity Health; the Monterey Bay Independent Physician Practice Association; Aetna; Partners HealthCare; and Geisinger Health System.

Eleven healthcare policy experts were interviewed in the development of this report, including David Balto, Attorney, Law Offices of David A. Balto; Leemore Dafny, PhD, MBA Class of 1960 Professor of Business Administration, Harvard Business School; David Johnson, CEO, 4sight Health; Sonal Kathuria, Managing Director, Life Sciences & Health Care, Deloitte Consulting; Bob Leibenluft, Attorney, Hogan Lovells LLP; Eb LeMaster, Managing Partner, Ponder & Co.; Paul T. Liistro, Managing Partner, Arbors of Hop Brook Limited Partnership and Vernon Manor Health Care Center, and Administrator, Manchester Manor Health Care Center; Terry Rappuhn, Leader, HFMA’s Patient Friendly Billing Project; Chris Stanley, MD, Vice President-Population Health, Catholic Health Initiatives; Adria Warren, Partner, Foley & Lardner LLP; and David Young, COO, Privia Medical Group.

Two other reports in the Health Care 2020 series, focusing on consumerism and the transition to value, are available now. Another report, on innovation, will be released in December. All will be accessible at hfma.org/healthcare2020

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