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AARP Bulletin

Hospital Mergers May Be Good for Business, But Patients Don't Always Benefit

En español l Wilson Medical Center has served the residents of the small, leafy town of Wilson, N.C., for almost 50 years. But now this profitable 294-bed hospital — the only hospital in the county — may have to become affiliated with a larger medical system.

hospital merger bigger better small communities community cost patients lower brighter law health medicare medicaid mania coming soon building eat small buildings big (Butch Martin/Getty Images)

What’s the impact on patients when smaller hospitals merge? — Butch Martin/Getty Images

Rick Hudson, Wilson's chief executive, has hired a consulting firm to advise the hospital on its options. He thinks the hospital may not survive if it remains independent. "It would be malpractice on my part as the CEO not to do what I can to make this hospital thrive and grow."

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Wilson is part of a sweeping national trend that has hospitals making vital changes — from joint operating agreements to outright takeovers by larger hospitals and hospital systems.

Facing tremendous pressures to cut costs, hospitals also are forming partnerships with doctors' practices and other health care providers — all of which means medical care is becoming more concentrated in fewer institutions.

What can patients in Wilson — and other communities — expect when their familiar local hospital suddenly has a big new partner?

Higher prices for patients

While hospitals typically maintain they are merging or affiliating for greater efficiency, higher quality of care and increased savings, the most common consequence for patients is higher prices for medical care, according to several decades of research.

A hospital merger boom in the 1990s, for example, increased patient costs by 5 to 40 percent in areas where only a few hospitals dominate, according to the Robert Wood Johnson Foundation. Large systems with a number of hospitals tend to charge higher prices in communities where they outnumber their rivals, says health economist James C. Robinson of the University of California, Berkeley.

But Delos Cosgrove, M.D., president and CEO of the Cleveland Clinic, which now has an extensive hospital system, champions the wave of mergers and acquisitions as a way to improve patient care and expand services.

Here's a look at what millions of patients in small towns and big cities across the country are facing as U.S. hospitals undergo fundamental changes.

What's happening to our hospitals?

Independent hospitals like Wilson are going the way of the corner drugstore and neighborhood bank — with many taken over by a larger rival or by a chain.

More than 100 hospital deals took place in 2012, double the number just three years earlier. Of the 5,724 hospitals in the United States, about 1,000 will have new owners in the next seven years or so, predicts Gary Ahlquist, a senior partner with the consulting firm Booz & Company. And hospitals that want to remain independent will have a harder time staying afloat.

"The days of the stand-alone community hospital, in large part, are numbered," says Larry Scanlan, author of Hospital Mergers: Why They Work, Why They Don't. He compares today's independent hospitals to the beloved hoagie sandwich shops that once dotted Philadelphia streets: "The hoagie shop has disappeared. If you want a hoagie now, you go to Subway."

Next page: Why is this happening? »

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