“Merger would create a giant in Atlanta health care”

By: Andy Miller

Published February 15, 2015

It’s a long way from being a done deal, but if it happens it will shake up metro Atlanta health care.

Emory University and WellStar Health System announced last week that they are discussing a merger of their medical assets, a fusion that would face regulatory and logistical challenges. Completion of a deal is at least a year away.

Emory University Hospital Midtown

Yet the news of even a possible marriage between nonprofit heavyweights Emory Healthcare and WellStar sent a tremor through the metro Atlanta health care industry.

The proposed union would be the biggest example of hospital consolidation so far in Georgia, and it could trigger other combinations.

Standalone metro hospitals such as Gwinnett Medical Center and DeKalb Medical may be forced to consider aligning with other entities, said David Smith of Kearny Street Consulting.

A potential Emory/WellStar pairing could also make Texas-based Tenet Health’s facilities – especially North Fulton Hospital – more attractive to other large systems, including Piedmont Healthcare and Northside Hospital. Tenet Health is seeking a partner or buyer for its Georgia hospitals, Georgia Health News recently reported.

“Atlanta is a big market,’’ Smith said. “It’s big enough for three or four big [health] systems to survive.”

Fundamental changes

The consolidation push reflects fundamental changes revolutionizing health care — how it’s paid for and how it’s delivered. Much of that upheaval has been accelerated by the Affordable Care Act.

“The health care system is changing for all participants,’’ said Bill Custer, a health insurance expert at Georgia State University.

Leaders of Emory and WellStar spoke of these changes after revealing the merger talks last week.

The goal is to create a new nonprofit company containing the assets of both Emory Healthcare and WellStar.

“It is a true 50/50 partnership of equals,’’ WellStar CEO Reynold Jennings said.

Changes in hospital and physician payments helped spark the drive to consolidate, Jennings and Emory University President James Wagner both said.

Health insurers and Medicare are moving more toward paying for a bundling of medical services, rather than paying for individual procedures or tests separately. The goal: end the reliance on fee-for-service medicine, in which hospitals and doctors are reimbursed based on the amount not the quality of care they deliver.

The health care law encourages doctors, hospitals and other providers to form groups called “accountable care organizations” designed to better coordinate care and potentially qualify for bonuses if they’re successful. Medicare is also rewarding hospitals for higher quality of care, giving bonuses based on measures such as patient satisfaction and lower death rates.

But if the bonuses are a carrot, there’s also a stick: Hospitals face penalties for having high infection rates and for too many readmissions of patients they have recently discharged.

Private insurers have also moved to more quality-based payments.

Outcomes emphasized

Blue Cross and Blue Shield companies across the nation are spending more than $65 billion a year — about one in five medical claim dollars — in programs that provide incentives for better health outcomes for patients while reducing costly duplication and waste in care delivery.

As a result, “a lot of the [medical] provider systems are trying to find ways to deliver care more inexpensively,” said Craig Savage, a consultant with CMBC Advisors in Durham, N.C.

A bigger system can theoretically achieve savings through economies of scale, better electronic transfer of health data and improved care for people with chronic conditions.

WellStar Cobb Hospital

Partnering among hospitals has increased over the past few years. Partnerships are alliances that are weaker and less permanent than mergers.

These medical realignments have come during a time of unprecedented financial stress for hospitals, according to the Georgia Hospital Association.

Some struggling rural hospitals across Georgia have reached out for partnerships with larger, urban systems.

Meanwhile, full-scale hospital mergers have increased nationally.

The Emory/WellStar merger proposal may face antitrust review by the Federal Trade Commission, which has been fighting a controversial hospital merger in Albany for four years.

“The FTC would review it because of its impact on other health care providers,’’ said Custer, of Georgia State.

He said the new entity created from merging the two systems “would have tremendous leverage in negotiating contracts with private insurers. Together, they become a Goliath.”

Patient effect unclear

It’s unclear how a merger will affect consumers.

Custer said a merged entity could provide more medical entry points for patients and more choice of physicians.

Consumers could also benefit from more coordination of care, including for chronic health conditions. There would be seamless transfer of electronic health information, and it could foster more “paying for bundling of services rather than episodes of care,’’ Custer added.

He said the effect on prices is uncertain, and consumer groups share that apprehension.

“While there is the potential for better quality for consumers if the new entity places a focus on care coordination and patient-centered outcomes, consolidation alone doesn’t lead to better quality,’’ said Cindy Zeldin of Georgians for a Healthy Future. She added price increases are “a big concern.”

Beth Stephens of Georgia Watch said, “Research has shown most hospital mergers don’t lead to the kind of coordination of care that improves health outcomes or lowers costs for consumers.”

If the merger happens, Stephens said, she hopes it will lead to greater transparency on medical prices for consumers.

 

– See more at: http://www.georgiahealthnews.com/2015/02/merger-create-giant-atlanta-health-care/#sthash.RuqLl5ll.dpuf

Also published in the Atlanta Journal Constitution on Sunday, February 15, 2015

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