Hospitals across the nation are merging at a rapid pace these days—a trend that will impact the health care collections industry in numerous ways. Mergers are occurring at the fastest rate since the 1990s, the New York Times reported in a recent article (http://nyti.ms/16S1nqe). Various factors are driving the trend, including implementation of many parts of the Affordable Care Act over the next two years.
In particular, hospitals find themselves being paid less on volume under the health care law and more on the quality of care they provide, the Times noted. That means there is less of an incentive to keep beds full, and more incentive to keep patients healthy and out of the hospital. This encourages providers to merge, reduce overhead costs, and focus instead on implementing expensive electronic medical records systems that allow them to more effectively track and evaluate patients.
Consulting firm Booz & Company predicts that 1,000 of the nation’s roughly 5,000 hospitals could seek out mergers in the next five to seven years, according to the Times. ACA International member Chris Becraft—who is president of Collection Service Bureau, Inc. in Phoenix, which specializes in health care receivables management—said the industry is going through its “biggest roll-up ever.”
“Large systems are needing to either grow organically, through opening up new facilities or services, or purchase others,” he said. “Independent facilities are unable to make a profit with the current state of government reimbursement so they either need to merge or go out of business. The independent regional hospitals are an endangered species and I predict there will be very few left in five to seven years.”
Becraft added that he sees some problems for collection agencies as a result of these mergers. “What this means is there are fewer clients for collection agencies to do business with today and there will be far fewer in the future,” he said. “There is very little hope for the smaller agency to remain viable exclusively in health care unless they are content with the ever-shrinking margin and market they will be getting from small providers.”
Becraft said the mergers topic is frequently discussed among staff at his agency. “It’s a very big topic with staff,” he said. “When a change happens, that is when we can either gain business or lose it. More agencies will be losing business because of this than gaining, I can guarantee you that. We intend to be on the gaining side and are growing aggressively to be able to continue servicing these larger providers.”
Becraft added that it’s not just hospitals that are merging—many collection agencies are merging as well, in an effort to stay viable in the health care collections field.
“Larger health care providers will eventually only want to do business with other large entities because that is what will make sense to them,” he said. “The future of high volume health care RCM will be the exclusive domain of large companies because that is all that will exist eventually in both industries.”