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New Laws, Rising Costs Create Surge Of Supersizing Hospitals

Tue, 08/13/2013 - 9:52am
Julie Creswell and Reed Abelson

Hospitals across the nation are being swept up in the biggest wave of mergers since the 1990s, a development that is creating giant hospital systems that could one day dominate American healthcare and drive up costs.

The consolidations are being driven by a confluence of powerful forces, not least of which is President Obama’s signature healthcare law, the Affordable Care Act. That law, many experts say, is transforming the economics of healthcare and pushing a growing number of hospitals into the arms of suitors.
 
The changes are unfolding with remarkable speed. Two big for-profit hospital chains, Community Health Systems of Tennessee and Health Management Associates of Florida, are combining in a $7.6 billion deal.
 
In New York City, Mount Sinai Medical Center, which is one of the country’s oldest and largest private nonprofit hospitals, is buying the parent of Beth Israel Medical Center and St. Luke’s and Roosevelt Hospitals. Tenet Healthcare of Dallas, which operates in 10 states, is buying Vanguard Health Systems of Nashville, a network of 28 hospitals and facilities that includes Detroit Medical Center.
 
In fact, Booz & Company, a consulting firm, predicts that 1,000 of the nation’s roughly 5,000 hospitals could seek out mergers in the next five to seven years.
 
“There’s immense logic for them to become large super-regional systems, even some national systems,” said David W. Johnson, a managing director for BMO Capital Markets, which advises nonprofit health systems. Some chains are merging to increase their size and their negotiating clout with insurers, while others are trying to reduce costs and improve care, he said.

Some economists and health insurance companies worry that the trend could raise health care costs.

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