COMMENT XXXX
Making hospital and health system consolidations work
Healthcare experts Jonathan Pearson, Colin Lewry and Greg Scrine discuss the history – and the future – of mergers in the sector.
UK context “B
etween 1997 and 2003, over half of the 200 or so acute NHS hospitals in
England were involved in a merger in which at least one hospital trust was absorbed into another. The scale of the consolidation was such that the average number of hospitals in a local health economy fell from seven to fi ve.”
This quote is taken from a recent study, which concluded that these mergers failed to deliver their promised improvements. That may partially explain why there has been little merger activity amongst acute providers in recent years.
But it is clear that the relative calm in UK merger activity of the past seven years is ending. In 2013, the UK Competition Commission rejected the merger of Royal Bournemouth and Christchurch Hospitals NHS Trust and Poole NHS Trust. That decision, and the delays and expense leading up to it, resulted in changes in governance and political tone that make it far more likely that mergers will be a key tool in addressing a growing case for change.
And we have found that the case for change is growing:
• In 2008-09 the NHS embarked on a process to generate £20bn in productivity improvements by 2015, requiring
20 | national health executive Sep/Oct 14
providers to make substantial recurrent effi ciency savings of 4% per annum. Having broadly achieved this objective, the NHS now faces a further challenge related to a projected funding gap of up to £30bn in the period to 2020-21.
• The drive for seven-day working and for better quality and outcomes increases the need for savings, because it is more expensive to operate outside of traditional hours. However, it is also driving consolidation. For specialist services, there is a strong body of evidence that an increasing number of clinical services are better concentrated in fewer centres undertaking higher volumes of activity. There is now a major drive to push the consolidation of specialist services further, with the potential to remove signifi cant volumes of specialist activity from smaller hospitals.
• Patients consistently report that they expect the health services they use to be more joined up and better integrated. There is also considerable evidence that new models of integrated care can be more eff ective, can provide better patient experience and can support health systems to meet future demand. The activity shifts demanded by this change will drive merger and acquisition activity.
So, merger activity is a likely fact of life in the next 10 years – but history shows that mergers do not release the benefi ts that drive them. Through our work in trusts across the UK and abroad, we believe that mergers or hospital federations can deliver savings and improve care.
Areas of opportunity
Key sources of value creation through consolidation can be considerable and have positive eff ects on cost, capacity, access and quality of care, but require operating as an integrated system. Bringing two operations together generally takes one of three approaches:
1) Merge the functions, creating economies of scale, reducing management
Frimley Park Hospital NHS FT has got the go-ahead for a take-over of struggling Heatherwood & Wexham Park Hospitals NHS FT.
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