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Over the last ten years, the hospital industry has become increasingly consolidated through the formation of multi-hospital health systems and networks and the legal merger of institutions under a single license. In 2003, 62% of hospitals in the United States were involved with a health system or network. After accounting for their combined ownership or network affiliations, in many markets across the country there are only three to five hospital organizations in operation.
Despite extensive structural consolidation and relationship development, in terms of operations and services, many hospitals look no different than they did before merging or affiliating with a system or network. However, as part of a study examining trends in heath system consolidation and the integration of health care services, Bazzoli found that a growing number of health systems are retooling the service structure across their affiliated hospitals. Responding to new market imperatives and opportunities, these systems have focused on:
More efficient spaces
Historically low interest rates and attendant low-cost financing, Bazzoli observed, have spurred major capital projects. In a number of hospital systems, renovation and new construction projects are intended to replace aging hospital facilities, create amenities that patients desire (especially private rooms), and accommodate new clinical and information technologies. In some markets, hospital systems are also expanding their capacity in response to increased demand for health services.
As hospital systems become involved in issues of facility design, many are seeking more effective ways to deliver services across their affiliated hospitals. In some markets, systems are building facilities that centralize specific activities such as cardiac care or oncology services. This kind of consolidation frees up space inside existing system hospitals, enabling services and capacity to be further restructured. These efficiencies, the study notes, are not tied to more traditional motives of counteracting declining reimbursements. Rather, systems are rebuilding hospitals to improve the flow of patient care within a facility. More efficient treatment and discharge of patients means that more patients can be accommodated by a facility.
The threat of specialty facility development is also prompting some hospital systems to rethink their service structure. Today, there are approximately 100 specialty hospitals nationwide and an additional 40 with CMS approval to move forward. Hospital systems in these highly competitive markets are responding by creating or expanding their own centers of excellence. Such system-developed facilities provide a means for centralizing certain hospital service lines. In response to growing evidence that patients and their families prefer the amenities and atmosphere offered by specialty hospitals (especially the feeling of intimacy of a smaller facility and the presence of specialized staff) hospital systems are also considering how their centers of excellence can emulate those features.
Bazzoli concludes by observing that the key to effectively reorganizing health care systems is to understand the events of the past. An extensive literature exists on the various barriers and facilitators to clinical service line consolidation and integration. The study also notes that because new market imperatives are different from those of the past, some stakeholders might not recognize the impact of a change on a system’s long-term viability. Thus, it is also vitally important that new market imperatives be explained to key stakeholders and that their importance be reinforced through continuing strategic communication.
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