Hospital consolidation results in lower quality of care and higher costs, so says the research
November 10, 2010The Beaufort Regional Health System has begun negotiations with outside organizations that have submitted proposals to take over the Heath System (Hospital) totally or to take over the management of the System. We did some research and found that the people of Beaufort County need to be very skeptical of monopolistic health care delivery systems and even with competing systems we need to have a viable way of tracking the quality of care.
The Negotiating Committee, comprised of board members Alice Mills-Sadler, Dr. Brenda Peacock, Hood Richardson and Suzanne Gray, met with University Health Systems on November 9 and plan to meet with Community Health System on November 16, LHP Hospital Group on November 17 and with Brimm Healthcare at a to be arranged future date.
Click here to review the Summary of the proposals prepared by the consultants working with the Hospital board.
The content and scope of the negotiations has not been disclosed. None of the public hearings produced much help for the committee in suggesting either the scope of the negotiations nor the methodology of comparing the alternative proposals. The negotiations will be in secret, based on a special state law that specifically permits such sessions to be done in secret, according to Hospital Public Information Officer Pam Shadle.
One factor that was not even mentioned in the public hearings was what impact a takeover would have on the cost of health care. Moreover, there were no specific suggestions for how the impact on quality of care should be assessed. Most of the speakers simply extolled the virtues of the aura that they painted around UHS and denigrated "for profit" operations as not offering as high a level of care as do "not-for-profit".
So we did some research looking for a study that had reviewed the existing research on the issue of hospital consolidation. What we found was interesting.
The prestigious Robert Woods Johnson Foundation published a study in February, 2006 that found that hospital consolidation has had a negative impact on the cost and quality of care. That issue becomes pertinent when comparing the UHS proposal to others because UHS would essentially be a consolidation and would result in less competition within the Beaufort market, at least in the western section of the county in that UHS would have a monopoly in the market, if it takes over the BRHS market, at least in the largest population areas of the county.
What the RWJ report says is:
• The balance of the evidence indicates that the 1990–2003 consolidation in metropolitan areas raised hospital prices by at least five percent and likely by significantly more.What the RWJ study offers the BRHS board is a framework for comparing the impact of reorganization of the health care delivery system. Whether they will choose to use a research-based approach remains to be seen. What is obvious is that the medical community within the county has not, thus far, offered any suggestions for utilizing objective, research-based criteria. But at very least the RWJ Foundation shows that such an approach is possible.
• There is evidence from several studies indicating that consolidation among hospitals that are geographically close to one another lead to large price increases. Studies have found consolidation-specific price increases of 40 percent and more.
• Although the results of the literature are mixed, a narrow balance of the evidence and the evidence from the best studies indicates that hospital consolidation more likely decreases quality than increases it.
• Although the results of the literature are mixed, the balance of the evidence indicates that hospital facility consolidation produces cost savings for the consolidated hospitals.
The rise in consolidation in local hospital markets raises several issues and trade-offs for policymakers to consider. Hospital markets in most parts of the country have not become monopolized. As Figure 1 shows, the typical MSA had slightly more than four effective competitors in 2002. In most industries, market consolidation goes in waves. Should there be another unchecked wave of hospital competition in the future, such a wave is likely to result in higher prices and lower quality. In some markets, there may be a monopoly provider, and these markets present special challenges for regulators.
The Evanston Case--Prior to the Evanston case, the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) have been unsuccessful in seven consecutive attempts to block hospital mergers and had not won a hospital case since 1989. An October 2005 ruling to dissolve a 2000 merger in Evanston, Ill. reverses this pattern and is an important landmark for at least three reasons.
First, the court found that the hospital market was geographically limited.
Second, the court found that a modest increase in concentration led to a significant increase in hospital prices.
Third, the judge ordered the divesture of the merged entity.
The Evanston case highlights the importance of understanding the impact of hospital concentration on prices, costs and quality of inpatient care. The ruling also establishes that consummated hospital mergers raising antitrust issues may be reexamined.
Click here to review the RWJ report.
Our main concern in this issue is that the people of Beaufort County receive the best available health care that is realistically possible. We have great admiration for UHS, having availed ourselves several times of their services. But we also have great respect for the quality of care Beaufort's hospital has offered. Whether Beaufort agrees to be taken over by UHS or someone else or whether it chooses to remain independent we think a realistic balance must be struck between quality and cost. But striking such a balance requires having a systematic way of assessing quality. We are very disappointed in our medical community that it has not offered its judgment about how best to assess quality of care.
We do not think UHS automatically offers the better care. But even if UHS is nirvana, that does not mean it will always be, any more than any other organization will be for the next twenty-thirty years. We think the negotiations should include some provision for continually assessing the quality of care and there should be an ejection clause that would allow the merger being divested if the local governing board deems it appropriate. We strongly object to an iron-clad lease that excludes an option for divestiture in the event of deterioration of the quality of care. Whether that would ever need to be exercised is not as important as the impact the threat thereof would have on whoever the provider is.
And we believe that it is simply common sense that quality and cost are going to be less effectively dealt with in a monopolistic system than in one where the patient has choices. In the event of a takeover by UHS, and its concomitant local monopoly, we think local control of the governing board and the ability to revise and/or rescind the deal is even more important.
But we also believe such local control is important with others who might take over either the facilities or the management of the system.
So one of the things we think the negotiators should insist upon is that each proposer specify a methodology they would find acceptable in assessing quality of care and a "non-performance" clause being included in the lease.