Consolidation across the US provider landscape is hardly a recent phenomenon. In the run-up to the Affordable Care Act (ACA) and since its passage, many healthcare leaders believed that affiliating with a larger system would be the key to survival. The numbers bear that out. According to the American Hospital Association:
- Nearly 70% of US community hospitals are part of the approximately 400 health systems in the country.
- Just over 50% of US health systems have fewer than 5 hospitals, and a similar 50% have fewer than 1,000 beds.
- The 200+ hospitals—mostly rural—that have closed since the year 2000 either never had the chance to join a system or did and still couldn’t be saved.
This consolidation trend is likely to continue. Smaller health systems and independent hospitals are facing multiple drivers of consolidation, and many of these organization crave the strength of a larger health system to create integrated regional delivery networks and bolster their competitive position.
But even in light of those potential advantages, system affiliation may not be the right choice for every organization. Bigger, in itself, does not equate to better. How you act and what you do as a system matters more than scale.
In this article, ECG partner Andy Bachrodt takes a closer look at the factors driving hospital consolidation and argues that independent hospitals and smaller health systems must carefully evaluate their strategic, operational, and financial position to discern when—and if—they should consider joining a system.
For some, remaining independent is the right path forward, and that path may include strategic and deliberate collaboration with other regional organizations that can, in many respects, achieve some of the same benefits that are afforded through system affiliation.
Edited by: Matt Maslin
