Whether it's quality, prices, or spending, consolidation doesn't often enhance the value of care delivery.
As more and more hospitals and health systems pursue integration, the potential negative impact on patients shouldn't be overlooked.
Consolidation seldom leads to better quality of care delivered or reduced prices, according to a study published in the Journal of the American College of Surgeons. Organizations must weigh the strategic and financial benefits of mergers and acquisitions against the consequences for the communities they serve.
The study's authors reviewed 37 studies published from 2000 to 2024 that met the criteria of including horizontal or vertical consolidation, and reporting on at least one measure of value (price, cost/spending, and quality).
Of the 26 studies that measured quality of care, 20 (77%) demonstrated no change or lower quality after integration, while only six studies showed improved quality, driven by better care management processes instead of outcomes.
Of the 14 studies measuring price changes, 13 (93%) featured increased charges, whereas 13 of the 16 studies (81%) focused on health care spending revealed higher costs or no charge.
“Proponents of health care integration have claimed it controls costs and enhances care quality,” Bhagwan Satiani, lead study author and professor of surgery emeritus at The Ohio State University Wexner Medical Center, said in a statement. “But we found that evidence is lacking that integration alone is an effective strategy for improving the value of health care delivery.”
Overall, eight of the 37 studies (22%) found that integration had a positive net impact, versus 20 studies (54%) which showed a negative net impact.
“These findings provide an opportunity to better define value with a focus on benefiting patients while balancing the financial stability of the health care industry,” Satiani said. “Quality improvement in health care cannot be achieved by mergers and acquisitions alone.”
A new report assesses the well-being and distress levels of groups within the industry.
To improve employee retention, it remains vital that hospital and health system CEOs focus on reducing burnout.
Fortunately for organizations, fewer healthcare workers reported feeling burned out in 2023 compared to 2022, according to the 2023-2024 State of Well-Being Report.
The Well-Being Index, developed by Mayo Clinic, gathered 79,022 assessments across various healthcare occupations in 2023 to track how groups are distressed.
When respondents were asked if they felt burned out from their work in the past month, 50% answered yes in 2023, a decline from 54% in 2022.
Pharmacy professionals experienced the most burnout among professions at 62%, but that figure was also lower than in 2022 (66%).
Meanwhile, burnout for nurses and physicians was at 52% and 51%, respectively, in 2023, compared to 60% and 53% in 2022. The drop for both group is likely indicative of organizations enhancing and offering more well-being initiatives, particularly on the nursing side. More nurses in 2023 (51%) said they strongly agreed or agreed with the statement "my work schedule leaves me enough time for my personal/family life" than in 2022 (47%), while fewer reported emotional problems in 2023 (60%) than in 2022 (64%).
The only group that saw the burnout trend reversed was medical students, with 58% reporting burnout in 2023 versus 51% in 2022.
Hospital and health system CEOs may not be able to influence burnout at the medical school level, but they should be working to ease stress for their younger works to ensure staff are supported and eager to remain in the profession. Younger clinicians ages 18 to 29 especially value when their organizations address racism and discrimination in the workplace, according to a survey conducted by the African American Research Collective, in partnership with the Commonwealth Fund.
Even though burnout rates are showing improvement, CEOs continue to place an emphasis on the well-being of their employees to combat a projected workforce shortage of over 100,000 critical care workers nationwide by 2028.
A study examines the differences in margins and commercial prices between critical access hospitals and other acute care hospitals.
Among hospitals facing financial pressures, critical access hospitals (CAHs) are particularly in a precarious position.
Compared to other acute care hospitals, CAHs have lower operating margins, with the gap even wider for independent and system-affiliated CAHs, according to a study published in JAMA Health Forum.
Researchers from Brown University and Johns Hopkins University obtained operating margins and hospital prices on over 4,000 hospitals in each dataset, limited to general medical and surgical hospitals and excluding speciality hospitals from 2016 to 2022.
The data revealed that the average operating margin was 2.6% for independent CAHs and 7% for system-affiliated CAHs, versus 11.4% for independent non-CAHs and 16.6% for system-affiliated non-CAHs.
Operating margins for system-affiliated CAHs were 63% higher than for independent CAHs, highlighting the discrepancy in negotiating leverage with commercial insurers, the authors stated.
The one area CAHs had favorable operating margins was in Medicare, where CAHs were around 2% while non-CAHs were approximately -4%. All hospitals, however, had similar Medicaid operating margins at around -18%.
In terms of standardized inpatient commercial prices, system-affiliated CAHs were 7.1% higher than independent CAHs, whereas independent non-CAHs were 15.4% lower and system-affiliated non-CAHs were 13.2% higher.
Though system affiliation can improve the financial health of hospitals and especially give CAHs some relief, it has shown to also result in higher prices for patients.
"Policymakers interested in improving patient access to hospital care in rural areas should consider the impact of consolidation for both CAHs and non-CAHs, such as whether the increased commercial prices associated with system affiliation correspondingly lead to improved and sustained patient access to care," the authors wrote.
Surveyed C-suite leaders from health systems and health plans forecasted the coming year.
As the healthcare industry turns the page on a demanding 2024 and heads into the new year, leaders could have reason to be bullish.
While challenges persist, a better understanding of how to tackle them, along with an improved financial climate, is giving healthcare executives the confidence to expect a favorable 2025, according to a survey by Deloitte's Center for Health Solutions.
The survey, comprised of responses from 80 C-suite executives from large health systems and health plans with revenue greater than $500 million, revealed that 59% have a positive industry outlook for the coming year, compared to 52% a year ago.
Driving that outlook is a belief that revenue will increase in 2025, which 69% of respondents anticipate, and that profitability will improve, expected by 71%.
"Over the past two years, many US health care organizations have faced margin pressure, workforce shortages, and an industrywide push to adopt digital technologies," the survey's authors wrote. "After several years of stabilizing their businesses, 2025 could mark a turnaround period for the health care sector, driven by innovation, resilience, and strategic growth."
The new year, however, does bring uncertainty as well, due to a new Presidential administration affecting regulatory and policy changes. Forty-four percent of respondents said that the uncertainty could impact their strategies in 2025.
The two areas leaders are prioritizing for their strategies are growth, chosen by 65%, and consumer affordability, cited by 46%. To achieve organic growth, many respondents are focusing on acquiring new consumers rather than pursuing mergers and acquisitions, the survey stated. To appeal to new consumer, 53% of executives want to improve the consumer experience, engagement, and trust.
Over half of respondents (55%) are also eying cybersecurity enhancements, while 36% identified investment in technology platforms, underscoring the importance of digital strategies for growth.
Priorities differ for health systems and health plans. Whereas insurers care more about investing in transformative technologies and preparing for regulatory changes, health systems are zeroed in on addressing workforce challenges and strengthening core business technologies.
More than half (58%) of health system leaders anticipate workforce challenges like lack of retention to impact their organizational strategies in 2025, though the urgency around the workforce has reduced the further out the industry is from the pandemic, according to the survey.
Even with the landscape potentially evolving for the better, all organizations must continue to refine their approach to ensure they're not just planning for 2025, but beyond as well.
Providers and retailers alike had to navigate a restructuring process due to industry headwinds and challenges.
Healthcare organizations across all sectors were plagued by financial pressures this year, resulting in restructuring and bankruptcy for many.
Here are four notable bankruptcy cases CEOs followed in 2024:
Steward Health Care
Arguably the most visible bankruptcy in the industry this year was Steward Health Care’s, which saw the Dallas-based health system file for chapter 11 and put all 31 of its U.S. hospitals up for sale.
The company racked up debt from missed rent and vendor payments, putting a spotlight on the potential impacts of private equity-backed organizations.
While Steward has managed to sell some of its facilities, it has also struggled to divest many others, partly due to disagreements with its landlord, Medical Properties Trust.
Cano Health
The Miami-based primary care chain was another provider who dealt with its own financial turmoil.
Cano filed for bankruptcy and entered into a restructuring support agreement in February before emerging in the summer as a private company.
By exiting underperforming regions and refocusing on its Florida market, Cano said it was on track to hit its goal of $290 million in annualized cost reductions by the end of the year.
Rite Aid
Almost a year after filing for bankruptcy, Rite Aid also completed its financial restructuring in September with new leadership in place and a significant amount of debt cleared.
Matt Schroeder, who was most recently CFO since 2019, took the reins as CEO while the company slashed $2 billion of its debt and received approximately $2.5 billion in exit financing.
The Philadelphia-based drugstore retailer was forced to close hundreds of brick-and-mortar stores in the wake of its bankruptcy.
CareMax
Steward’s troubles didn’t just result in the health system’s bankruptcy, but contributed to CareMax entering restructuring, according to the Miami-based provider.
In announcing its bankruptcy, the company highlighted its relationship with Steward, which filed a motion to reject its contract with CareMax when it entered chapter 11.
Additionally, CareMax was hit by rising costs from leases, increasing interest rates, changes in regulatory reimbursement, inflation, escalating labor and operational costs, and high levels of medical utilization following the pandemic.
Here are the HealthLeaders stories on CEOs that readers were most interested in following this past year.
From major strategic moves to an unforeseen tragedy, healthcare featured several developments over the past 12 months that grabbed the attention of leaders at the highest level.
These were the five most-read HealthLeaders stories on CEOs in 2024:
One of the biggest stories across the industry this year was the murder of UnitedHealth CEO Brian Thompson.
Following the shooting, UnitedHealth Group CEO Andrew Witty spoke to employees and defended the company’s oft-criticized denial practices, which only added fuel to the social commentary fire.
"Our role is a critical role, and we make sure that care is safe, appropriate, and it's delivered when people need it," Witty said. "We guard against the pressures that exist for unsafe care or for unnecessary care to be delivered in a way which makes the whole system too complex and ultimately unsustainable."
In HealthLeaders’ coverage of the CEO market this year through interviews, research, and virtual and in-person events, trends emerged for topmost executives to track.
Among the eight highlighted trends were “mounting financial pressures,” which have plagued hospitals and health systems everywhere as labor costs have increased due to workforce shortages, as well as a “surge in M&A” with organizations choosing to pursue dealmaking to reshape portfolios or achieve financial stability.
CVS had a tumultuous 2024 as it significantly reshaped its leadership to chart its course for the coming fiscal years.
In the summer, the retail giant ousted Aetna president Brian Kane while CEO Karen Lynch took the reins on operations following a poor second quarter.
In October, the company also moved on from Lynch and put David Joyner in charge, with the new appointee most recently serving as executive vice president of CVS Health and president of CVS Caremark.
Ascension was an active seller on the M&A market this year as it worked to reduce expenses and narrow its focus to key regions.
One notable sale was its deal with Prime Healthcare to offload nine Illinois hospitals and four sites of care.
For Prime, the transaction marked the largest acquisition in the organization’s history and came with a commitment from the health system to invest $250 million into the facilities with no debt put on the hospitals.
The state of Oregon will take a closer look at the deal, which is likely to delay the timeline for it to be completed if it receives approval.
The proposed joint venture between Providence and home health provider Compassus is now under scrutiny in Oregon.
The Oregon Health Authority notified attorneys representing Compassus in a letter that the transaction requires review by the Health Care Market Oversight (HCMO) program, potentially putting the deal in jeopardy and likely delaying its completion if it passes.
Under the HCMO program, state regulators can approve or deny mergers and acquisitions if they are considered anti-competitive or detrimental to Oregon’s health outcomes.
The Oregon Nurses Association called on the Oregon Health Authority to review the transaction in a letter earlier this month. Thomas Doyle, general counsel for the Oregon Nurses Association, highlighted that the joint venture could reduce essential services, such as pediatric home health.
“There is a compelling case that the proposed transaction requires HCMO approval and that Providence is seeking to sidestep that approval process or to create a sense of urgency by filing at the last minute for approval,” Doyle wrote.
As part of the proposed deal, which was announced in October, the joint venture would be called Providence at Home with Compassus and provide home health, hospice, community-based palliative care, and private duty caregiving. Compassus would mange operations for 24 home health locations in Alaska, California, Oregon, and Washington, and 17 hospice and palliative care locations in Alaska, California, Oregon, Texas, and Washington.
Providence and Compassus were aiming to close the transaction by the end of the year, according to licensing records obtained by the Oregon Nurses Association and published on the HCMO website. The HCMO review, however, could take anywhere from 30 to 180 days.
Providence spokesman Gary Walker toldOregon Public Broadcasting that the health system had filed the necessary paperwork.
“We fully intend to work closely with OHA and comply with all requirements in the review process,” Walker said.
A spokesperson from Compassus said the organization had reached out to the Oregon Health Authority in November to seek guidance on its review process for the deal.
"From the outset, we understood regulatory reviews could add time to our anticipated transition timeline. We are prepared and committed to ensuring any questions or concerns are addressed. Ensuring the well-being of patients and their families, as well as the smooth transition of Providence caregivers to our team, are our top priorities," the spokesperson stated.
Editor's note: This story has been updated on Dec. 20 to include comment from Compassus.
A new report highlights trends and challenges in how organizations are paying providers.
Rural hospitals face no shortage of obstacles to remain viable, but provider compensation is an area they can better strategize for to ensure long-term sustainability.
Currently, pay for rural providers varies significantly and is poorly aligned with organizational goals, leaving hospitals vulnerable to financial challenges, according to a report by Stroudwater Associates, in partnership with the National Rural Health Association and the National Organization of State Offices of Rural Health.
The survey, which fielded 199 responses from 42 states representing over 2,841 providers, revealed that salary variability continues to increase. Though the median pay for a family medicine physician without obstetrics is $260,000, total compensation for these providers ranges from $179,500 to $420,874.
Rural hospitals have difficulties in recruiting and retaining physicians, but they should tie compensation to the services providers deliver to avoid overpayment and excess labor expenses.
Additionally, it’s vital for hospitals to link compensation with incentives so providers are working in step with organizational strategy.
However, 54.7% of respondents report paying providers a straight salary with no performance or quality incentives, a decrease from the mark of 56% in 2023. Less than a third of respondents (32.1%) provide some form of incentive compensation, which is down from 37% last year.
“Despite provider compensation being the single most expensive item on the hospital’s P&L, rural leaders are setting compensation based on provider requests,” Opal H. Greenway, principal at Stroudwater, said in the report. “Rural leaders must start aligning compensation with incentives that support the organization’s goals to maintain operations. Data. Strategy. Alignment. These milestones are the only way forward for rural healthcare leadership to recruit and retain primary care physicians and advanced practice providers and maintain the financial health of the hospital.”
Rather than solely basing incentives on productivity with the use of work relative value units, hospitals should incorporate quality measures so providers can shift their mindset from strictly fee-for-service to more value-based care.
Yet only 13% of surveyed respondents said they provide quality incentives, with more independent hospitals (16.7%) doing so than health systems (7.6%) despite the imbalance of resources and data.
“Rural healthcare organizations must evaluate the relationship between productivity, quality, and compensation,” Greenway said. “Misalignment puts organizations at risk of either losing providers, overpaying for them, or being noncompliant. Coverage or other immediate needs may call for variances outside of this, but should be the exception, not the rule.”
Major names set a course to exit the industry in the past 12 months, creating opportunities for the next wave of leaders.
This year saw many hospitals and health systems replace their longtime CEOs with new faces as their veteran leaders opted to call it a career.
Having a succession plan in place should be a priority for organizations to ensure a seamless transition, even if it involves a significant shift in strategy and approach.
Here are four notable health system CEOs who revealed over the past year that they would be stepping away.
Advent Health’s Terry Shaw
After serving as president and CEO of the faith-based system since 2016, Shaw is set to retire in July 2025, ending a 40-year stint with AdventHealth.
During Shaw’s tenure, the hospital operator rebranded from Adventist Health System in 2019 and expanded to include 51 hospital campuses and hundreds of care sites in nine states.
Shaw, who will remain on the system’s board of directors, is a proponent of cultivating innovation within an organization to achieve transformation.
AdventHealth said it will select an internal successor to Shaw in April 2025.
Cedars-Sinai’s Thomas Priselac
The Los Angeles-based system said goodbye to Priselac at the end of September, bringing a close on a 45-year chapter with the organization, including 30 as president and CEO.
While Priselac was at the helm, Cedars-Sinai grew to more than 40 locations with more than 4,500 physicians and nurses.
In his place is Peter Slavin, who brought over his experience as president of Massachusetts General from 2003 to 2021.
Slavin shared with HealthLeaders how he is setting out to improve the Cedars-Sinai’s workforce by making “the work environment as positive and joyful as possible.”
Banner Health’s Peter Fine
One of the industry’s prominent figures wrapped up a 24-year run as CEO of Banner Health on June 30, giving way to president Amy Perry.
Fine has witnessed firsthand how the role of a health system CEO has evolved throughout the years, reflecting the wants and needs of consumers.
He also helped the Arizona-based system grow to include 30 acute-care hospitals, three rehab hospitals, and more than 55,000 employees across six states.
Perry, meanwhile, is utilizing a technology-forward approach to bring the system into a new era by making it easier for clinicians to deliver care, along with improving the digital consumer experience.
Providence’s Rod Hochman
The end of the year will also mark the conclusion of Hochman’s CEO tenure at Providence and 45 years in healthcare.
In the 17 years Hochman spent with the Catholic health system, Providence expanded to 51 hospitals, more than 1,000 clinics, and more than 122,000 employees across seven states.
Providence chose to go the internal route for Hochman’s replacement, appointing chief operating officer Erik Wexler as the next president and CEO, effective January 1, 2025.
Duke Health has signed on to buy Lake Norman Regional Medical Center to grow its reach in North Carolina.
Community Health Systems has struck another deal for a hospital it has been trying to unload as it continues to aggressively divest.
The health system reached agreement with Duke Health to sell Lake Norman Regional Medical Center for $280 million, six months after a previous deal to move the hospital was abandoned due to regulatory pressure.
Mooresville, North Carolina-based Lake Norman Regional would add a 123-bed facility to Duke Health’s services in the Tar Heel State, representing a “significant expansion,” the academic health system said in a news release.
“We recognize the health care landscape is changing,” Craig Albanese, CEO of Duke University Health System, said in a statement. “While we continue to expand access to care within the communities we serve, it’s also time to do more and deliver care to more people – in more communities.”
Duke Health currently operates three hospitals that make up the Duke University Health System: Duke University Hospital, Duke Regional Hospital, and Duke Raleigh Hospital, a campus of Duke University Hospital.
For Franklin, Tennessee-based CHS, the deal marks a second opportunity to divest Lake Norman Regional, which was one of two hospitals on its way to Novant Health before regulators stepped in.
The Federal Trade Commission sued to block the transaction in January, arguing that the acquisition would allow Novant to control over 65% of the market in the region, resulting in less competition and negative consequences for patients. The agency later requested a preliminary injunction on the sale.
In June, Novant and CHS called off the deal, forcing CHS to seek out another buyer while it pursued a divestment plan to yield more than $1 billion in sales.
The new sale of Lake Norman Regional is expected to face less regulatory scrutiny because of Duke Health’s market presence and the fact that the hospital is being acquired as part of a standalone transaction.
If the deal passes regulatory review, it is expected to close in the first quarter of 2025, according to the news release.
Aside from Lake Norman Regional, CHS has also had difficulty completing other sales this year.
In November, the health system and WoodBridge Healthcare mutually agreed to terminate their agreement for three Pennsylvania hospitals for $120 million due to the buyer failing to secure funding.
