Recent hospital mergers across the nation have resulted in significant cost savings and have the potential to advance quality improvements, according to new research released by the American Hospital Association.

The analysis, Hospital Merger Benefits: Views from Hospital Leaders and Econometric Analysis, prepared by economists at Charles River Associates, shows how hospital mergers can provide a framework to transform healthcare in the United States. 

The research shows that mergers can result in efficiencies that unleash savings, innovation and quality improvement. The data also shows that mergers do not lead to a spike in revenues that some claim are the motivation for mergers.

Among the study’s key findings:

• Mergers decrease costs due to economies of scale, reduced costs of capital and clinical standardization, among other efficiencies. An empirical analysis showed a 2.5 percent reduction – equal to $5.8 million – in annual operating expenses at acquired hospitals. Scale-related savings to acquired hospitals ranged from 5 to 10 percent of total operating costs.
• Mergers have the potential to drive quality improvements through standardization of clinical protocols and investments to upgrade facilities and services at acquired hospitals.
• Mergers typically expand the scope of services available to patients, and build upon existing institutional strengths to provide more comprehensive and efficient care.

“Patients deserve a high-value, high-performing healthcare system,” said AHA President and CEO Rick Pollack. “The key to transforming healthcare delivery is increased efficiency and quality. In some communities and for certain hospitals, consolidation may be necessary – not only to meet the current health needs of patients and communities, but also to provide a stable foundation upon which to build the healthcare system of the future.”