H2C PERSPECTIVES

 

The Evolution of Healthcare Transformation: From Scale to Integration 
posted on September 6, 2018

 

 

What happens when economies of scale are not enough? We believe it likely the era of consolidation among hospitals will begin to slow as markets mature and attention shifts to the next stage of health care’s evolution.

 

 

Familiar to nearly every healthcare provider and commercial health plan is that government reimbursement rates barely cover healthcare delivery costs, if that. Also well-known is that healthcare delivery costs have been increasing at rates that exceed inflation and government reimbursement trends—and are expected to continue to do so. Compounding this trend is the influx of additional Medicaid patients in many states following implementation of the Affordable Care Act and the absolute certainty that demographic trends will result in substantial and disproportionate increases in the utilization of healthcare services by lower-paying, higher-utilizing, government-insured patients.

This puts enormous pressure on healthcare providers to better manage their costs or to cost shift to the commercially insured. Neither alternative is pleasant, nor is it easy. So, it is only reasonable that healthcare providers would try to develop mitigating strategies amidst these increasingly dire circumstances. Some of these strategies are based on the premise that technological innovation will somehow present a solution. Others assume that mergers, whether horizontal (providers acquiring providers and health plans acquiring health plans) or, more rarely, vertical (providers acquiring health plans and vice-versa), will help address this enormous problem.

 

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