Blog, The Hospital Finance Podcast®

Consolidation of providers into health systems increased substantially, 2016–18 [PODCAST]

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The Hospital Finance Podcast

In this episode, we are joined by Dr. Michael Furukawa, Senior Economist at the Agency for Healthcare Research and Quality, to discuss their study on provider consolidations into health systems from 2016-2018. 

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Highlights of this episode include:

  • Background on AHRQ’s study on trends in consolidation of hospitals and physicians in the U.S.
  • What changes in provider consolidation occurred over the two-year period of the study?
  • How the number of health systems and their size changed over the study time period.
  • How many consolidations were related to mergers and acquisitions, as reported in AHRQ’s study?
  • What are some of the ramifications of these consolidations and their effect on the industry?
  • And more… 

Mike Passanante: Hi, this is Mike Passanante and welcome back to the award-winning Hospital Finance Podcast®. The consolidation of hospitals and physicians has altered the landscape of healthcare delivery in the United States. To examine recent trends in consolidation of providers into health systems, I’m joined by Dr. Michael Furukawa, Senior Economist at the Agency for Healthcare Research and Quality and lead author on a new study that looked at this important topic. Mike, welcome to the show.

Dr. Michael Furukawa: Thank you. Thanks for having me.

Mike: So, Mike, why don’t you start out by telling us what you were looking to address in this particular study?

Dr. Furukawa: Sure. So there’s been a lot of consolidation of hospitals and physicians into larger organizations, but less attention is focused on vertically integrated health systems. And that’s where a parent organization owns both hospitals and physicians together. So we wanted to understand how consolidation of providers into health systems changed from 2016 to 2018, and in particular, how did the number of systems and the system size change, and then how did the landscape of health systems vary by ownership type in 2018? And by health system, I’m referring to large integrated health systems such as HCA Healthcare, Ascension Health, Kaiser Permanente.

Mike: So why don’t you tell us about the data that you examined and the methods that you used?

Dr. Furukawa: Sure. So we developed what we called the AHRQ Compendium of US Health Systems. It’s a publicly available database that my agency puts out. And it contains information about vertically integrated health systems in the US with various characteristics like size, ownership, location, and we had other information about affiliated positions and hospitals. So we developed the data on health systems for the two time periods in order to compare the change. We defined a health system in our study as an organization that includes at least one acute care hospital and a group of physicians that could provide comprehensive care. And by that, we required the system to include at least 50 total physicians and 10 or more primary-care physicians. So we did a comparison of the health systems in 2016 and 2018, and we had information about their size, about their ownership type, about their geographic scope. And we also looked at mergers and acquisitions that occurred among health systems.

Mike: What changes did you see in provider consolidation over that time period?

Dr. Furukawa: There were substantial changes in provider consolidations from 2016 and 2018. In fact, the share of physicians in health systems increased from 40 to 51 percent or 11 percentage points which means that for 2018, over half of physicians in the United States were affiliated with one of the 637 health systems that we identified in 2018. The number of primary care physicians in health systems also increased from 38% to 49% in 2018. The number of hospitals– or the share of hospitals in health systems was already fairly large in 2016, but it increased modestly from 70 to 72 percent from 2016 in 2018. And the share of hospital beds increased from 88% to 91% over the two-year period.

Mike: So let’s talk about health systems. What changes did you see regarding the number of health systems and their size over that same time period?

Dr. Furukawa: Sure. Well, the number of health systems increased. There were 626 health systems identified in 2016. We identified 637 health systems in 2018. There were some mergers and acquisitions that occurred, so some of the health systems in ’16 became part of another, and there were some newly identified systems that met our definition by employing more physicians or becoming integrated in that time period. So the size of the health system increased pretty dramatically in terms of the physicians. So the median number of physicians increased from 285 physicians to 369 physicians, a 29% increase over the two-year period. Whereas the number of hospitals in a system did not change from the median of two hospitals in 2016 and 2018.

Mike: Did you note any consolidation among those health systems?

Dr. Furukawa: Absolutely. There was substantial consolidation of systems by other systems. In fact, we identified 50 deals related to mergers or acquisitions. And the deals included 52 target systems. Most of those systems were relatively small with the median of two hospitals and about 150 physicians. And the acquiring systems were mostly large, broad in scope, and operating in two or more states. So our pattern, that we observed, was large systems operating in multiple states acquiring small systems that typically operated in the metro area or a single state.

Mike: Did you observe any variances related to ownership type?

Dr. Furukawa: Yes, we did. So there’s substantial variation by ownership type. Nonprofit systems tend to be relatively small of a median of two hospitals. And most nonprofit systems operate within a single metropolitan statistical area or a single state. And public systems were also relatively small and limited in geographic scope. In contrast, for-profit health systems and church-operated health systems were relatively larger. In fact, they had significantly more hospitals and tended to be operating in two or more states.

Mike: So when you think about all of these findings put together, what would you say the potential ramifications are of them?

Dr. Furukawa: Well, there is several ramifications. Consolidation can potentially have anti-competitive effects. So there’s some evidence that larger systems are able to charge higher prices and increase spending, so there could be some issue with antitrust in some markets. And also just the number of systems and the scope of systems in local and national efforts to regulate providers to ensure that community needs are met could be complicated given the diversity of systems and the sheer number of systems across the country.

Mike: Mike, if someone wanted to learn more about this study or your other work, where can they go?

Dr. Furukawa: Well, we have a website for the project, the AHRQ Comparative Health System Performance Initiative. It’s on the AHRQ website. The Compendium of U.S. Health Systems, the underlying data is publicly available on this website. The URL is

Mike: Thank you very much. Dr. Michael Furukawa for joining us today on The Hospital Finance podcast.

Dr. Furukawa: Thanks for having me.

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