CEO Message

Hospitals Joining Forces Can Expand Access and Quality — and Shrink Costs

“When considering cost containment, are researchers and policymakers considering hospital system membership separate from market concentration? They probably should.”

That tweet, posted by the University of Southern California’s Schaeffer Center for Health Policy & Economics, references a study it just published on hospital system participation and health care spending. The study offers an important counter-perspective to the conventional wisdom that hospital “systemness” increases costs.

Recent public discourse about hospital integration often assumes that it contributes to overall health care spending, but the USC researchers discovered some trends to the contrary that must be considered:

  • Hospital system membership and market concentration are two different issues. The researchers found that hospital systems are not strongly correlated with market concentration and tend to have a broad reach beyond geographic markets. 
  • States with the highest proportion of system hospitals tend to have lower per capita hospital costs. California ranks as the ninth lowest state in per capita hospital costs (75% of hospitals beds in the state are part of hospital systems).

What we also know about hospitals that join forces within systems is that they improve their ability to leverage resources, innovation, and technology. This creates efficiencies for coping with burdensome regulations and enables a shift of resources to quality initiatives. In many areas — like rural and underserved communities — system integration preserves access to care by keeping open hospitals that might otherwise shutter.

Patient care in the 21st century has meant more hospitals reinventing themselves to meet their patients’ and communities’ needs by integrating and, in so doing, creating more options for people to get the right care at the right time and in the right setting.

This new data suggesting hospital systems yield lower health care spending means that policy makers will need to reconsider some common assumptions if they want to preserve high-quality care while keeping costs in check.

In 2020, as California lawmakers focus more keenly than ever on the issue of health care affordability, integration will be part of the discussion — and studies like these, which demonstrate the need for more research, will be critical to shifting the tone in the Capitol.

— Carmela

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