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Merger on Your Mind? Go Ahead, Take the Plunge

Philip Betbeze, for HealthLeaders Media, May 31, 2013

The Deloitte study found that expansion of volumes is critical to value creation. Wait, you say, volumes have always been critically important to financial success. True, but volumes haven't been limited in the recent past in the way that CMS and increasingly, commercial payers, are limiting them.

Increasingly, there's good volume and bad volume. For lack of a better term at deadline, let's call this metric "volume quality." That is, 30-day readmissions are "bad volume," because no matter the payer, those readmissions are being punished financially in ways they haven't before.

And those punishments are real. Hospitals that readmit within 30 days for the same condition not only lose reimbursement for that admission, but they incur sometimes very high costs for treating those patients a second time.

Organizations with high "volume quality" seek others who have the same commitment and means to achieve it, or they seek bargains from those who are bad at volume quality, but just need the resources of a national chain that has figured out how to improve it without massive investment. Call it transferable institutional sophistication, whether it comes from scale or a proven track record, or both.

The "volume quality" metric is just one example of the increasingly complicated ways hospitals must compete with each other and with quality standards to achieve good reimbursement.

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