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M&A and the Cost of Quality

John Commins, for HealthLeaders Media, November 13, 2011
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Tim Putnam

CEO
Margaret Mary Community Hospital, Batesville, IN

Many small critical access hospitals do not have a lot of spare folks with the expertise to do the latest quality study or the latest reporting requirements for CMS or the myriad of other agencies that require onerous reporting. A lot of the hospitals have merged because of that ability to adapt to changes much more quickly.

At this point there is no advantage for us to merge. We have the capability, we’ve been successful financially, we have comparable high-quality care, and a good ability to recruit and retain physicians. Within the next five years, though, it could be like the prom: Everybody will expect you to have a date. If we looked around us and saw that every hospital was affiliated with one system or another, it inhibits our ability to work with other hospitals. It is difficult to be the only one at the prom without a date. From the quality standpoint, the mission of the small hospitals is to serve the patient population in their area to the best of their ability. Joining a system, they fear the loss of autonomy to continue to do that. The first time there is a big cut in funding the small hospitals could be the first thing on the chopping block and they won’t be able to serve their core mission. 

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1 comments on "M&A and the Cost of Quality"


Dean Oschwald (11/29/2011 at 11:46 AM)
I would agree that there is power in size when negotiating reimburesment from Incurance companies. However, I have found that being independant from purchasing groups can save a great deal of money on equipment and supply purchases. The other point I would make is that while the Government has listened to the lobby for saving on healthcare cost by eliminating the independant surgery centers, Cath Labs, Sleep centers and moving them into the Hospitals, this will not reduce cost. It will have the opposite effect. I managed a Cardiology group who had their own Diagnostic Cath lab. We were around 10% of the cost of the closest hospital, we had newer equipment and the same Cardiologist doing the same procedures in the hospital. Our reimbursements were much lower that the exact same service at the hospital with the same providers. The Hospital bought out the Cardiology group, and cost increased to the patients and all the insurance companies as well as the government Medicare and Medicaid programs. In a like for like comparison, the cost are higher with the hospital providing the service. I watched every penny and contained costs. Our outcomes were better, only because we had dedicated staff that was highly trained to do nothing else but take care of these patients. We did constant in-service training, and tracked everyhing. We were AAAHC certified, but we were still locked out of some insurance company participation because of the Hospital Lobby efforts. Consolidation will not reduce costs or improve outcomes. Tactical apporaches to conducting business including price negotiation for supplies, equipment and services will reduce costs and specialization of staff training and care to the serivce line will improve outcomes. This can happen with or without consolidation and merger.