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M&A and the Cost of Quality

John Commins, for HealthLeaders Media, November 13, 2011
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Norm Deets

COO
CGH Medical Center, Sterling, IL

In the big cities where there are multiple hospitals and there is a lot of duplication, that is where you are going to see some improvement on costs, as far as duplication of services and equipment. That will raise overall quality simply from the standpoint that every hospital might not have a heart program.

As you get into small community hospitals, I’m not so sure you are going to get the same effect simply because it is usually one city and one hospital and there is not the duplication of services. So I don’t know how you are going to come up with your costs.

If they are absorbed or bought out by bigger organizations, I worry about the quality of care for the community. Not for the quality of care that is being administered in that community at that point in time, but I can see less and less being done in those small hospitals simply because the larger organization will look at it as more efficient to bring patients to the metropolitan area instead of bringing healthcare into their local area. Unfortunately, you are going to lose a lot of local control and in the long-term your smaller hospital becomes more like a Band-Aid center. I don’t look at that as a positive.

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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.