What too many providers forget is that the success or failure of their practice has much more to do with what happens outside the operating room. Hospital mergers are a case in point. What might have seemed like an ideal practice at an independent hospital can change dramatically when the facility either merges with another hospital or when it is sold to a large healthcare system. This is when the practice must prepare for an entirely new reality for which they have never been trained. Vigilance is being redefined.
Market Consolidation
Consolidation is what today’s business is all about. Bigger is better and healthcare is no exception. Niche facilities are dinosaurs and a thing of the past. Today’s healthcare organizations strive to be all things to all people. Not only have hospitals been expanding to include ambulatory facilities that get them more integrated within the community, but they are actively pursuing partnerships that gain them greater market share and more financial control over their own destiny. The question is, what happens to the relationship with the anesthesia group that has been serving them so diligently? There is no one consistent answer, but there are a multitude of considerations and options. It is a new world for anesthesia providers and one in which they are well advised to enroll qualified consultants and advisors.
Below are some of the largest hospital systems within the United States. This is just a sample, as the list of those that have acquired multiple facilities keeps growing. The point is that this is a trend and a significant phenomenon. Through the first three quarters of 2023, there have been 53 announced hospital mergers, according to a report from healthcare consulting firm Kaufman Hall. That already equals the 53 hospital mergers reported in all of 2022. There were 49 hospital deals in 2021.
- HCA Healthcare (Nashville, Tenn.): 182 hospitals
- Veterans Health Administration: 171 hospitals
- CommonSpirit Health (Chicago): 140 hospitals
- Ascension (St. Louis): 139 hospitals
- Trinity Health (Livonia, Mich.): 88 hospitals
- LifePoint Health (Brentwood, Tenn.): 84 hospitals
- Community Health Systems (Franklin, Tenn.): 79 hospitals
- Advocate Health (Charlotte, N.C.): 67 hospitals
- Tenet Healthcare (Dallas): 61 hospitals
- Christus Health (Irving, Texas): 60 hospitals
What drives all these mergers and acquisitions? Most observers would argue there are three primary objectives:
- Market share that feeds the overall financial strength of the organization.
- Market dominance that permits each to set the standard of care for the market.
- Efficiency that enhances the profitability of each facility.
Impact at Each Facility
Clearly, an organization that is responsible for many facilities and multiple anesthesia practices prefers to have consistency of care and management. For many, the goal is to contract with one anesthesia organization, although this is not always feasible. This is, however, something that each anesthesia practice should keep in mind. It is important and useful to know as much as possible about the other departments. There are some notable examples of healthcare organizations that forced the anesthesia departments to merge. When Mainline Health consolidated its three facilities in the Philadelphia area many years ago, the administration suggested it preferred to deal with one anesthesia organization. This is what resulted in United Anesthesia Consultants, PA. When Northshore University Hospital and Long Island Jewish Hospital began their consolidation of the New York and Long island markets that would ultimately result in Northwell Health, LLC, North Shore Anesthesia Associates created NAPA so that Northwell Health would have one monogamous anesthesia partner.
Obviously, the objective of each anesthesia practice should be to maintain a certain degree of independence and autonomy, but many factors will determine the outcome of a merger. One of the most critical factors is the amount of financial support the practice needs to remain viable. Subsidy negotiations are often the most contentious issue for anesthesia practices. Too often, administrations will respond to high subsidy requirements by employing the providers.
Ultimately, anesthesia practices with the clearest and most consistently delivered value proposition do the best in a large entity. Success in any organization has to do with one’s contribution. Anesthesia practices that are focused on problem-solving and value creation become the models on which most organizations want to build.
The fact is that just as anesthesia providers should always plan for never events, so too should anesthesia practices always be planning to be part of a larger entity. The reality is that ultimately most anesthesia providers will work for some larger entity. The objective is to be the one who defines that process rather than the one who has it imposed.