Hospital consolidation: Why it’s all about the finances
- Valerie Bauman
- Puget Sound Business Journal
As hospitals across Washington have consolidated, leadership usually points to the improved services and better patient care that will result.
But at the core of these deals are financial drivers: Affiliations allow hospitals to save money or make money. If it didn’t pencil out, they wouldn’t do it.
“There are a lot of reasons why hospitals would affiliate, but certainly one of them is that you have more access to resources if you have a bigger partner,” said Mary Kay Clunies-Ross, spokeswoman for the Washington State Hospital Association.
These affiliations do have the potential to improve quality and access to care for patients, but even nonprofit hospitals need to worry about the bottom line. That’s the message I received from one reader this week in response to an interview I had with Congressman Jim McDermott. The Seattle Democrat called for federal research into hospital mergers to ensure that the deals don’t result in higher costs for patients.
Jeannine Lyon, a reader, wrote in to share her personal perspective as a hospital employee charged with keeping costs in check.
“Our society/industry doesn’t create bigger hospitals because they are better for patients,” Lyon wrote. “We as a people create bigger hospitals because there is no other way to afford to service growing populations of patients who qualify for the expanding services of required free care.”
Lyon is a process improvement consultant at St. Joseph Medical Center in Bellingham, a PeaceHealth facility. Her job requires her to find efficiencies that make hospital operations more affordable – whether it’s cutting the amount of time patients spend unnecessarily in the emergency room, reducing inventory, or cutting staff.
As hospitals across Washington have consolidated, leadership usually points to the improved services and better patient care that will result.
But at the core of these deals are financial drivers: Affiliations allow hospitals to save money or make money. If it didn’t pencil out, they wouldn’t do it.
“There are a lot of reasons why hospitals would affiliate, but certainly one of them is that you have more access to resources if you have a bigger partner,” said Mary Kay Clunies-Ross, spokeswoman for the Washington State Hospital Association.
These affiliations do have the potential to improve quality and access to care for patients, but even nonprofit hospitals need to worry about the bottom line. That’s the message I received from one reader this week in response to an interview I had with Congressman Jim McDermott. The Seattle Democrat called for federal research into hospital mergers to ensure that the deals don’t result in higher costs for patients.
Jeannine Lyon, a reader, wrote in to share her personal perspective as a hospital employee charged with keeping costs in check.
“Our society/industry doesn’t create bigger hospitals because they are better for patients,” Lyon wrote. “We as a people create bigger hospitals because there is no other way to afford to service growing populations of patients who qualify for the expanding services of required free care.”
Lyon is a process improvement consultant at St. Joseph Medical Center in Bellingham, a PeaceHealth facility. Her job requires her to find efficiencies that make hospital operations more affordable – whether it’s cutting the amount of time patients spend unnecessarily in the emergency room, reducing inventory, or cutting staff.
She’s seen firsthand how cash-strapped hospitals can be.
“If any one hospital is not ‘big enough,’ it would not be able to afford the advanced technologies and specialties required for the most up-to-date patient care,” Lyon wrote. “That equipment, those surgery rooms and those physicians and nurses are all expensive. The hospital can’t simply have one MRI and not offer general X-ray, ultrasound, CT scans or interventional radiology, for example. As such, the hospital must be ‘big enough’ to afford the technology that is associated with prolonging life and improving health.”
Lyon also objected to the suggestion that hospitals can freely raise rates to make more money.
“Our communities’ individual hospitals don’t set the rates. The Centers for Medicare and Medicaid Services primarily set the rates, since most hospital care is financially supported by CMS. Payers (insurance companies) also limit the amount paid to hospitals, further helping to set the rates.”
It’s worth noting that rates for the same procedure can vary depending on what hospital a patient is in, what insurance they have and how many times their doctor has performed the procedure, among other factors.
Public frustration with rising health costs is likely fueled by a lack of transparency. If average Americans can’t figure out how much it will cost to have a colonoscopy or angioplasty, how are they supposed to wrap their minds around what is driving cost hikes nationally?
Readers, let me know what you think.