Business

Getting bigger helps health-care companies but what about their patients?

Among recent deals among health-care companies is the drugstore chain CVS buying Aetna, the health insurer.
Among recent deals among health-care companies is the drugstore chain CVS buying Aetna, the health insurer. AP

For production reasons, this column was written several days in advance, so in the gap between the typing and the publication (in print or online) it’s likely we’ll miss a few more health-care-industry deals, rumored, announced or completed.

Not that there’s a shortage of such deals to consider even without the latest.

Just in the last few weeks we’ve had DaVita Medical Group’s acquisition of Tacoma-based Northwest Physicians Network, rapidly followed by DaVita’s parent selling the medical-group subsidiary to UnitedHealth Group’s OptumCare division in a $4.9 billion deal.

In the “rumored” category, Renton-based Providence St. Joseph (which includes Swedish and Pacific Medical Center but not, as the name might suggest, Tacoma’s St. Joseph Medical Center) is considering a combination with Ascension Health, which has a hospital in Pasco.

That would be a big deal but even bigger is the announced purchase of health insurer Aetna by drugstore chain CVS (which has been expanding in Washington in recent years.)

That flurry of big-ticket transactions obscures dozens or smaller purchases and combinations that are almost routine these days, such as MultiCare forming a joint venture with Olympic Sports & Spine Rehabilitation. The joint venture will operate 14 physical-therapy clinics in Pierce and South King counties.

And those are just the ones with significant local implications.

Whatever the size and location of the deal, whoever the involved parties are, some common themes run through all of them.

No one’s sure what the health-care system will look like or be paid for 10 years from now, other than a whole lot more people will be participating in it, the product of a huge population cohort moving into their latter years.

But the health-care providers and insurers that expect to make it through the next decade figure the best way to survive until then is to get bigger now.

Which is why there will be more deals, if not in the next few days, then certainly in the weeks to come.

What we described earlier as a flurry of announcements is not an anomaly or fluke. The big want to get bigger still. The small and medium-sized players figure they need to join the ranks of the big, lest they get stepped on by the giant players.

It’s why Catholic Health Initiatives, the parent of Franciscan Health System, the parent of Tacoma’s St. Joseph and other local hospitals, announced plans earlier this month to merge with Dignity Health, creating a 28-state operation with, according to the release, 700 care sites and 139 hospitals, 159,000 employees and more than 25,000 physicians and other clinicians.

What does bigness get these health-care conglomerates?

More clout for negotiating purchases. More clout in dealing with insurance companies and the federal government on reimbursement. More opportunities to keep whatever is being spent by and for the patient in house, through sprawling networks of primary-care practices, specialty clinics and hospitals.

What does it get doctors, nurses, health-care workers and support staff?

They might get more job stability and financial security through affiliation with a larger entity. Or they might get less, especially in areas of overlap. If the point of a combination is to cut costs, then headcount is an easy place to start. Companies don’t need two accounting departments. More stifling bureaucracy also has an unfortunate tendency to accompany bigness.

And what does bigness do for those who are supposed to be the center of these endeavors – the patient?

Health-care consumers might benefit from being part of a larger, interconnected service providers able to diagnose and treat whatever ailment the patient might have. They also might find themselves lost in the same bureaucratic maze the providers are in.

As the players build their portfolios (or in the case of DaVita, decide what to get out of), the news of deals will be accompanied by stories on the Next Big Thing that is going to radically transform American health care and magically make it affordable for everyone.

Given the debatable track record to date of such miracle cures as electronic records (leading to complaints that doctors spend more time typing than examining), telemedicine, wellness campaigns, concierge medicine and the like, considerable skepticism should greet the next can’t-miss cure-all, such as big data.

Not that people won’t stop trying to come up with them, or making deals to construct the perfect model of a modern health-care behemoth. A lot of money is at stake here.

Perhaps the best advice to those seeking a financially rewarding career in medicine is not to become a doctor but a mergers-and-acquisitions adviser.

Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at bill.virgin@yahoo.com.

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