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Wave of hospital mergers will continue, CEOs say
Keith Zimmerman, CEO of Medical City Children’s Hospital, says bigger health systems have advantages because they can consolidate administrative functions.
Bigger typically is better when it comes to health care systems, so the surge in hospital consolidation is here to stay.
That was the consensus of hospital executives on a recent Dallas Business Journal roundtable.
Two major Dallas-based health systems — one nonprofit and the other publicly traded — are involved in large-scale mergers. Dallas-based Baylor Health Care System is merging with Temple-based Scott & White Healthcare, and Dallas-based Tenet Healthcare is acquiring Nashville-based Vanguard Health Systems.
Keith Zimmerman, CEO of Medical City Children’s Hospital, said size does make a difference, especially as health care reform cuts reimbursements and pressures hospitals and other health care providers to coordinate care. Medical City Children’s is part of HCA, one of the country’s largest health care systems.
“With having scale and size, we can consolidate a lot of our back office administrative functions to where we can provide more care at the bedside,” Zimmerman said. “It’s about taking and saving dollars in areas where there’s not really value to the consumer and putting those in a place where there is value.”
Joel Allison, president and CEO of Baylor Health Care System, said consolidation is going to continue.
“Part of it is brought on by the Affordable Care Act,” Allison said. “You’re looking for scale to bring you synergies to where you can become more efficient.”
The Affordable Care Act is increasing emphasis on population health management, in which health care providers assume accountability for the overall cost of care to a defined group of people.
“Our vision as far as Baylor/Scott&White coming together was around population health management,” Allison said. “You’re goin
g to need a larger population to manage. I think providers will have more risk pushed on them, and to be able to take that risk you have to have a large population to serve and data analytics and capability to scale to be able to invest in the information systems and other technology.” Hospital systems consolidate for different reasons said Dr. Daniel Varga, chief clinical officer and senior executive vice president of Texas Health Resources.
Some get larger to drive down costs, he said.
“You can demonstrate to the market, ‘We’re a commodity,'” he said. “We’re big enough, we’re strong enough, we can deliver a really high-quality product to you as an acute care hospital vendor.'”
Others get bigger to explore different ways to manage the health care population, Varga said.
“They’re saying ‘We’re going to rethink the care model,'” Varga said. “‘We’re willing to see utilization in our hospital drop significantly as we manage the population differently and essentially generate our dollars in a different way so we can reinvest in our mission.