The healthcare industry is continuing its dive into consolidation. Definitive Healthcare, the leading provider of data, intelligence, and analytics on the healthcare provider market, tracked 803 mergers and acquisitions, as well as 858 affiliation and partnership announcements during 2018, according to survey results released in April.
Why consolidate?
Health care industry experts have said that industry segments have been highly fragmented market with opportunity to gain competitive advantages through scale. Consolidating could help businesses tap into the unexplored opportunity. Centralizing overhead function, scaling bigger, and negotiation leverage in size are all financial benefits to consolidation. In addition, consolidation could solve certain problems: it helps distribute hospitals’ excess capacity, and spreads the risk among larger areas.
Consolidation in the Home Health Care Industry Accelerates
The home health care industry has also begun to explore the consolidation trend.
Currently, more than 42 million Americans are aged 65 or older, a number that is expected to double by 2050, according to census projections. The approximately 9 million individuals 85 years of age and older is a number that’s expected to nearly triple over the same period. Most of them would like to remain at home as they age. Some believe consolidation is the best approach to serving this growing demand.
For example, November 2018 saw a merger between two of Washington state’s largest independent home care agencies Family Home Care and Family Resource Home Care, resulting in a company with more than 750 employees and a base of roughly 1,000 clients. The agency’s leadership has said that it’s the first move in a broader strategic plan to become a regional powerhouse capable of capturing Medicare Advantage plans.
Among other mergers were Humana, LHC and Almost Family, Addus, Bayada Home Health, and Briggs Healthcare.
Is this good for the industry?
The incentives to consolidate are certainly alluring, as seen with the Medicare Advantage plans. However, is this shift actually beneficial to the health care industry?
Looking beyond the balance sheet, many don’t think so. The benefits of a more competitive landscape include more personalized interactions, focus on quality over quantity, and improve patient outcomes. Mergers and consolidation, according to some recent studies, actually pose significant risks to patients.
“[S]taff who interact with these patients elsewhere in the hospital may also need new knowledge, skills, practice patterns, and support, such as having the ability to recognize and promptly treat withdrawal symptoms,” the authors of a recent JAMA paper titled “The Risks to Patient Safety From Health System Expansions” wrote. “Further, these changes are often not anticipated; an increase in referrals may bring an influx of non–English-speaking patients, for instance, who require more interpreters, institutional relationships with different community services, and increased awareness of economic and social challenges these patients face in following care guidelines.”
Where mergers and consolidation streamline financial costs, they compromise patient and provider relationships. Historically, consolidation degrades service quality because providers are absorbed into a larger organization instead of operating as their own boutique.
While consolidation can be beneficial when thoughtfully and diligently executed, the balance sheet alone isn’t compelling enough in the post-acute market. In fact, specialization and boutique-level service have proven highly effective as evidenced by the expansion of infusion centers nationwide. (To learn more, we recommend looking into NICA). Cost is a consideration in every business, but is shouldn’t be confused with the price of poor service.
About Right Way Medical
Right Way Medical provides supply, logistic, technology, biomedical and financing solutions to alternate site, long-term care and specialty pharmacy healthcare providers through an innovative suite of products and services combined with the highest level of customer service. Founded in 2014, Right Way Medical has become a trusted name in the infusion industry, and focuses every day to continue to earn that trust and provide its customers with the ideal experience in acquiring healthcare related products and service.
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