Healthcare organizations are increasingly consolidating to create greater scale and efficiency, but employers are skeptical about whether those perks will truly materialize.
Sheila Savageau, U.S. healthcare leader for General Motors, said she’s “optimistic” both payer and provider mergers may eventually lead to the promised cost savings—but haven’t yet.
At GM, for example, care utilization is down while unit cost is up, so now the work is figuring out what’s holding back the efficiency.
“I have a passion to ensure that while a system does get consolidated, we’re not on the losing,” Savageau said while speaking in Washington, D.C., Thursday at the National Business Group on Health’s annual forum.
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She said that GM understands insurance companies and for-profit providers have to drive value for shareholders—certainly, her company is concerned with the same thing—but while mergers and acquisitions in healthcare can achieve those goals, they must pay off for employees as well.
Steve Miller, M.D., executive vice president and chief clinical officer at Cigna, said he gets that skepticism. He said he experienced it himself when asked to move from a role at Express Scripts to his position at Cigna during that mega-deal.
But he was convinced, he said, because the company set an “audacious” goal for the deal: to have cost increases in line with increases for other U.S. goods and services by 2021.
“I think we’re at a tipping point,” he said.
In addition to the financial drivers, provider panelists said mergers have helped smaller organizations meet the requirements of a changing healthcare system, namely value-based care models.
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Carol Vargo, director of physician practice sustainability in the American Medical Association’s Physician Satisfaction and Practice Sustainability Strategy Group, said physicians see these models as “unsustainable” and will struggle to adapt to them without the right tools. That is where M&A becomes more attractive.
However, she said, it’s become clear as well that finding success in emerging payment and delivery models doesn’t require consolidation to the point of monopolization—nor does it mean that doctors can only reach their goals by joining forces with hospitals.
Hospitals are seeking similar value in mergers and acquisitions, said Melinda Hatton, general counsel for the American Hospital Association. These deals also become more attractive under the increasing threat of disruptors like Google and Amazon, which don’t face the same risks as providers.
Consolidation also reflects increasing consumer demand for alternative sites of care, including telehealth, which hospitals were not built for initially, she said.
Offering these services is “exactly what consumers want and expect and deserve,” Hatton said.