The Great Consolidation Begins

Is bigger always better? In healthcare, it just may be

By: Toby Cosgrove, MD

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Bigger isn’t always better, but when it comes to healthcare we’re finding that it usually is. Doctors, hospitals and medical centers across America are looking for ways to collaborate, consolidate and merge their resources. They’re discovering that high volume medical centers can produce better outcomes for many procedures and more effectively and efficiently provide care across a whole spectrum of services.

Healthcare is a low-margin economic activity. Enterprises of this kind are vulnerable to even minor fluctuations in the economy, much less the seismic shifts we’re seeing in healthcare finances today. Almost a quarter of American hospitals are already losing money. With that number bound to increase in coming years, we already know what to expect because we’ve seen it before in the airline, supermarket, phone and electronics businesses. There will be a wave of mergers and acquisitions to improve quality and lower costs.

Hospitals are gathering into systems; and systems are beginning to seek out other systems to expand their reach. Cleveland Clinic, for instance, merged with a three-hospital system and a two-hospital system, as well as several independent community hospitals over the past 12 years. We spent millions enhancing these facilities and investing them with our mission, vision and values. Today they’re strong components of Cleveland Clinic’s integrated healthcare delivery system.

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This week, we’re broadening this approach, inking a long-term strategic alliance with Community Health Systems, which operates 135 hospitals nationwide. What makes this alliance so interesting is that it brings together a non-profit institution (Cleveland Clinic) and a for-profit one – a clear indication that thriving in today’s healthcare environment will require new ways of doing things. While the two organizations will remain independent, we are both committed to discovering novel strategies to improve care, reduce costs, enhance access to healthcare services and develop new approaches to care delivery.

Consolidation, acquisition, mergers and alliances make even more sense when you consider the complexity of the healthcare business. The sheer number of services, supplies, technology, and maintenance that needs to be purchased and tracked is mind-boggling – not to mention the continual need to keep up with information technology and patient service expectations. All of this is very difficult to manage in private practice.

From a clinical standpoint, no single practitioner or small group to is able to keep up with the explosion of medical knowledge. Doctors want to work in a system where specialists collaborate and no one person has to be the expert on everything. Medicine is becoming a team sport.

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Some may worry that the trend toward consolidation may weaken the doctor-patient bond. I can assure you that this will not happen. Nothing is more sacred to our profession than the privilege of serving individual patients, sharing their lives in sickness and health and contributing to their individual wellbeing.

The great consolidation is coming. It will remake healthcare in coming years and change it – along the 20 percent of the economy that healthcare represents – for the better.

Delos M. Cosgrove, MD LinkedIn Profile

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