Stalled health bills could lead to increase in hospital mergers

Feb 20 2010

Some analysts expect an increase in hospital mergers if health care overhaul remains stalled and the head of the Cleveland Clinic discusses why he thinks an overhaul won't lower health costs.

The Tennessean reports that hospitals had supported the Democratic efforts on health care reform because of "the promise of insurance coverage for more people that would offset expected cuts in reimbursements." But with the legislation stalled and the prospect of increasing numbers of patients without insurance and cuts in Medicare rates, hospitals are concerned about their future. "Analysts expect a new wave of mergers and acquisitions in the wake of the collapse of comprehensive health reform, as nonprofit hospitals faced with financial pressures seek alliances with larger hospital chains that are better capitalized. ... In recent conference calls with analysts, officials of several Nashville area hospital chains have cited encouraging prospects for mergers and acquisitions" (Ward, 2/19).

CNNMoney/Fortune Magazine reports on the Cleveland Clinic, which has been praised for its ability to deliver high quality and low cost care, and interviews its chief, Dr. Delos Cosgrove. "Cosgrove spoke about obesity, smoking and medical costs noting "that regardless of what happens with health-care reform legislation, the costs are going to go up. We have more elderly people, and we can do more for them. So regardless of what happens, we can really only try to contain the rate of inflation. The cost is going to go up over time.'" In explaining the clinic's success, Cosgrove said, "'Most people don't realize that we are organized in a very different way -- very few hospitals are organized the way we are." For instance, staff members are salaried. "It doesn't make any difference, if I'm a cardiac surgeon, whether I do two heart operations a day or four. I take home the same amount of money at the end of the week. So there's no incentive to do extra tests or any of that." In addition, he said everyone has one-year contracts and professional reviews are done annually. "So the quality of the doctors is controlled, there's no tenure, and if you don't make it, you don't get a pay raise or you may not stay" (Colvin, 2/18).

Meanwhile, the Baltimore Business Journal reports: "The Maryland Hospital Association has asked the state's hospitals to determine how much the back-to-back storms that dumped about 50 inches of snow on the Baltimore area cost them in paid staff overtime, snow removal and other related expenses. The MHA plans to use that information to appeal to federal or state lawmakers — or both — and regulators in an attempt to recoup some of the cost, which industry insiders say could reach into the tens of millions of dollars" (Graham, 2/19).