Why Raising Hospital Prices is a Zero Sum Game

By ROBERT PEARL, MD In the early 1960s, President John F. Kennedy said, “The time to repair the roof is when the sun is shining.” It was a clarion call, a full-throated warning against national complacency in an era of great prosperity. It was during this same period that community hospitals stood as the dominant force in American healthcare. By the mid-20th century, some 6,000 inpatient facilities had spread throughout the country, often serving as the financial glue of their respective communities. With well-paying jobs and boards made up of dignitaries, local hospitals aroused a great chorus of civic pride. But in recent times, the proverbial roof over America’s hospitals has fallen into disrepair. Thanks to operational inefficiencies and declining utilization, more and more hospitals are experiencing financial problems and waning influence. As health plans, pharmaceutical companies and new care-delivery entrants gain market clout at the expense of the hospital industry, panic is starting to set in. These developments have spurred a recent uptick in hospital mergers, which look more like deals of desperation than long-term growth strategies. Merger Motives Mergers and acquisitions (M&A) typically serve one of two purposes. The first is to create a more efficient organization. Combining forces can help merged entities weed out redundancy and bolster innovation, resulting in superior products or services at lower prices. The second reason is to build negotiating ...
Source: The Health Care Blog - Category: Consumer Health News Authors: Tags: Uncategorized Source Type: blogs