A spate of hospital deals stands to further remake the US health-care landscape, pushing up prices for consumers and insurers and changing how individuals get care.
Just this month, health systems with at least 166 hospitals and $39 billion in combined annual revenue have announced merger plans. There’s likely more to come: The Wall Street Journal reported that Ascension and Providence St. Joseph Health, a pair of nonprofits that together have 191 hospitals and nearly $45 billion in annual revenue, are in deal talks. A fast-moving shakeout in the health-care sector has led to once-unorthodox deals across formerly distinct corners of the industry, as large insurers shift their business models amid pressure to bring down costs. That, in turn, has led hospitals to look for ways to preserve their revenues.
Health systems say joining forces allows them to better marshal resources and coordinate treatment. But mergers can also boost their bargaining power with insurers and employers, driving up costs and reducing options for consumers, research by economists has found.
Hospitals are looking to increase their muscle as insurers push into providing care. Last week, UnitedHealth Group Inc., the biggest US health insurer, struck a $4.9-billion deal to acquire DaVita Medical Group, which has about 15,000 affiliated or employed doctors and other providers, according to a May presentation to investors.
CVS Health Corp., meanwhile, agreed to acquire Aetna Inc., the No.3 US health insurer, for about $67.5 billion in cash and stock. CVS and Aetna are betting they can care for customers more cheaply and effectively in health clinics they plan to build in some CVS stores.
Insurers have tried to steer customers away from hospitals, which are typically the most expensive place to get care. Instead, they’re pushing doctor office visits and surgeries via outpatient clinics, telemedicine, and home visits. That could hurt margins for hospitals, though they’ve been building up outpatient practices and shifting away from inpatient care as well.
Johnny Smith, a spokesman for Ascension, didn’t respond to requests for comment on the Wall Street Journal report. Spokeswoman Colleen Wadden at Providence St. Joseph Health declined to comment.
Hospitals and health systems announced 561 transactions covering about 1,260 hospitals from 2010 to 2015, according to the American Hospital Association.
Bloomberg