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Does scale drive down quality in healthcare?

Consolidation of hospital and provider ownership is expanding rapidly.  Urban market hospital systems are expanding geographically, purchasing community hospitals to become regional healthcare delivery networks.  Hospitals are buying physician practices, outpatient treatment and other ancillary facilities to gain control of the continuum of care.  They hope to handle bundling and other risk management/cost reduction reimbursement schemes.  Hospital leaders also want to control referral patterns, capturing patients and medical service volume.

There are two hopes for operational value from scale.  Size will result in revenue capture (maybe 2+2 will equal 4 or even 6!). Size will result in lower costs (2+2 will equal 3?).  Often the assumption (hope?) is that clinical quality, provider productivity and other elements of operation will continue as they did before consolidation.  Changes to past processes, tools and policy may be kept to a minimum – to make the change in ownership less threatening or challenging for the newly acquired healthcare professionals.

However, scale seems to introduce factors that can have negative effects on performance.  Size makes governance much more difficult.  Widely distributed facilities and practices are difficult to monitor effectively.  When ownership moves away, motivations and priorities change.  Attention to operating discipline may slip, quality process commitment wavers and focus may narrow to achievement of specific incentives.  Accountability for general success has moved, leaving a vacuum of responsibility for outcomes and results.

Often, medical staff satisfaction becomes a performance goal.  A committed and happy medical staff is the source of admissions, referrals and revenue growth!  The new system owner may have access to capital or resources that can be used for investments physicians have been demanding.  This can mean changes to scheduling, clinical content, staffing, supplies that increase costs, complexity, slow patient care and Operating Room and other clinical asset lost productivity.   Dis-economies drive down performance.  Local control of local systems and management reporting mean that “adjustments” can be made to improve measurement data, masking actual performance.  Weak controls that rely on locally administered tools, submitted with “attestations” of accuracy can become mechanisms for hiding unacceptable outcomes, at least for a while.

If scale is your strategy, then it must be paired with complimentary policy, centrally administered standards for processes, automation, purchasing, clinical content governance, and rigorous operational metrics that make local operations and performance transparent to senior executives and all stakeholders.  Change cannot be avoided but must be embraced with discipline and committed leadership.

Achievement of synergies requires more than a change of ownership, signage and uniforms.  Consolidation of practice, comprehensive adoption of “best” or standard enterprise-wide standards across every facet of operations is necessary to maintain or improve clinical outcomes, sustainable operations and patient focused care.

Becoming a “healthcare system”? engage BrightWork Advisory, LLC to plan next moves today.

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