Are bigger hospitals better?
American hospitals are becoming bigger. Facilities in many markets are following a growing trend of merging to form larger health systems. Many of these systems are growing even larger by acquiring physician practices. The Affordable Care Act encourages collaborations among hospitals and physicians such as these. It rewards them with bonus payments under Medicare for forming alliances known as Accountable Care Organizations that are designed to coordinate care. Effective coordination is often lacking for patients with complex chronic conditions that require treatment from different specialists and institutions.
American hospitals are becoming bigger. Facilities in many markets are following a growing trend of merging to form larger health systems. Many of these systems are growing even larger by acquiring physician practices.
The Affordable Care Act encourages collaborations among hospitals and physicians such as these. It rewards them with bonus payments under Medicare for forming alliances known as Accountable Care Organizations that are designed to coordinate care. Effective coordination is often lacking for patients with complex chronic conditions that require treatment from different specialists and institutions.
By making it easier for providers to coordinate with one another, ACOs can reduce the risk of duplicate care that is unneeded or even dangerous. Among other strategies, they encourage the use of electronic medical records and other computerized technologies that make it easier to track patient care and outcomes. This helps them to figure out which treatments are working and which are not.
In theory, the bigger the provider organization, the better. A health system with more physicians and hospitals can offer a wider range of services and can track the care its providers render more effectively. This is true whether the system is organized as an ACO or according to another business model.
But size brings with it economic power, which gives health systems more bargaining clout with insurance companies. And that can lead to higher prices.
The federal government has grown increasingly concerned. The Federal Trade Commission, which enforces antitrust laws, has launched an aggressive campaign to challenge hospital mergers that it fears will reduce competition. The agency believes that competition among hospitals is needed to hold down health care costs, and it has convinced courts in several recent cases to order that mergers be unwound. (For a list of recent FTC health care antitrust enforcement activities, click here.)
So the government is telling hospitals on the one hand to get bigger in order to manage care more effectively and on the other hand to stay small to keep prices in check. What's a hospital to do?
Without question, better coordination of care is needed, especially for patients with chronic conditions. Lack of communication between providers runs up costs and places patients at risk of inconsistent treatments that can have serious adverse effects, for example, prescriptions for drugs that interact with one another.
However, competition between different provider organizations can also drive efficiency. It gives providers an incentive to maintain quality and hold down prices to remain in insurer networks. With no competition, this incentive can be lost.
The ideal solution would be for Congress to revisit the laws on provider coordination and antitrust to create a clearer set of guidelines to meet both goals. However, the focus of most recent Congressional health care attention has been on the 54 attempts of ACA opponents to repeal all or part of that law. If Congress could move beyond the politics of the ACA, it might instead be able to address more pressing health care concerns, such as the balance between provider collaboration and competition, to everyone's benefit.
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