Hospital Consolidation Presents Policy Challenges and Opportunities for States

November 29, 2017

Recent changes in the hospital industry, such as the increase in hospital consolidation, pose new challenges for states as they review proposed hospital mergers and acquisitions—especially since these activities often cross state lines. Measuring the benefits and costs of hospital consolidation is not a simple issue. Bigger hospital systems might use their market power to increase their revenue and resist new payment models. Alternatively, they can help small rural hospitals and physician practices stay afloat, and provide a backbone and capital to create accountable care models.

The Fund recently partnered with the New England States Consortium Systems Organization (NESCSO) to explore these questions on a regional basis. Thirty-five representatives from Connecticut, Massachusetts, Maine, New Hampshire, New York, Rhode Island, and Vermont met for a day and a half in Rhode Island in mid-October. Participants were executive branch leaders involved in hospital regulation representing health departments, attorney general offices, and special commissions, such as the Health Policy Commission in Massachusetts.

State representatives presented information on emerging issues in the hospital environment and regulatory responses in their state. Trish Riley of the National Academy for State Health Policy (NASHP) presented an overview of a NASHP report on state strategies to address rising prices caused by health care consolidations. During the meeting, participants split into work groups and identified several topics for further discussion—such as standardized reporting requirements for hospital community benefit activities and interstate data sharing related to hospital mergers—that could result in collaboration among participating states.

In 2016, the Fund partnered with NESCSO to sponsor a regional forum focused on the broad changes in the health care landscape resulting from the Affordable Care Act, with a particular focus on the changing role of hospitals. The Fund published an issue brief, Hospitals in the Post-ACA Era: Impacts and Responses, as a result of that meeting.

“As health systems increasingly pursue strategies that go beyond state lines, it is necessary for state governments to review their current regulatory approaches to determine if they need to be modified or coordinated,” said Elena Nicolella, NESCSO’s executive director. “Facilitating collaboration and communication across state departments and at a regional level enables state agencies to learn from one another and strengthens both interstate and intrastate efforts to meet goals of access, affordability, and quality.”

Rachel Block, Fund program officer said, “The Fund values its partnership with NESCSO and the New England states’ leaders, and we will support future regional collaborative projects stemming from this meeting.”