Healthcare reform is speeding up mergers and acquisitions and only the most profitable may succeed
December 8, 2010 -- Americans are painfully aware of the irony of the Affordable Care Act.
New England Journal of Medicine authors assure us this landmark bill will usher in extensive changes through “creative destruction
” of America’s fragmented healthcare system. Imagine the mythical phoenix arising from flames. Out of the ashes of destruction, Accountable Care Organizations (ACO) will build patient-centered medical homes
“because that's where we're going to get the care coordination, cost savings and quality of care that we're all interested in."
The vast majority of healthcare leaders
agree that mergers and consolidations of hospitals and medical practices will escalate with healthcare reforms. Only one in four of these leaders believe that they’ll have increased capital to do so.
Physicians, already besieged by the work of caring for patients, have been unloading their businesses over the past five years
to hospitals to eliminate the financial tolls of billing and technology. Thus, large multi-specialty medical groups are unlikely to be the predominant architects of ACOs. Larger health systems “can get a good hospital for pennies on the dollar and possibly turn it around quickly,” comments Paul M. Doelling, a director of specialty clinics.
Charles N. Kahn III is president of the Federation of American Hospitals
. As a lobbyist for investor-owned or managed community hospitals and health systems, he believes consumer protection laws will create barriers for ACOs
and suggests, “To provide a fertile field to develop truly innovative, coordinated-care models, the fraud and abuse laws should be waived altogether.” That’s one way to beef up profits.
“The big guys get bigger
,” says Chris Jedrey, a partner at the law firm representing Caritas Christi Health Care, after its recent $830 million acquisition by private equity firm Cerebrus Capital Management. This financially troubled, non-profit, integrated system was 2nd
largest health care system in New England.
Jedrey acknowledges that healthcare reform is speeding up mergers and acquisitions to get at the cost question. He says that America rejected single-payer as “politically unacceptable,” so the only remaining strategy is “shifting a lot of the costs of care risk to providers.” Providers must calculate how much financial reserves they need to bear the risk to bear the costs of information technology and other infrastructure.
“Politically unacceptable” policy takes us down the road most traveled. Consequently, Oregon’s insurance companies hoard their nuts for a cold winter while more Oregonians are uninsured. Risky financial markets create slippery slopes that will rise far faster than Accountable Care Organizations can level them.
Is creative destruction just a euphemism for disaster capitalism
? Without a single-payer, will we foreclose on patient-centered medical homes before they’re even inhabited?
Postscript: Today (December 10th) Tenet Healthcare, a privately owned hospital chain in 14 states, rejected an unsolicited a multi-billion dollar bid by Community Health. This merger would have created the largest hospital chain in America, exceeding privately owned Hospital Corporation of America. As noted in the Wall Street Journal, pressures to consolidate will be particularly true of smaller hospital systems that are struggling to keep afloat with increasing charitable care.
Dr. Kris Alman retired from healthcare to become a citizen activist for a healthier democracy. She advocates for fair taxation to invest in our common goods--prioritizing education, renewable energy, campaign finance and healthcare policies and laws.
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