01-08-13 | Blog Post

The Effect of Michigan Health System Mergers on Health IT

Blog Posts

Last year, Michigan saw widespread health system mergers, with a focus on the need to deliver integrated care. Part of the change may come from a shift in how healthcare is sold, meaning a switch from the traditional fee-for-service model toward a bundled payment model has driven independent hospitals and systems toward consolidation, as noted by McGuireWoods.com.

Trinity Health and Catholic Health East (CHE) signed a merger in October with an agreement to be final in Spring 2013, resulting in a combined operating revenue of $13.3 billion and assets of $19.3 billion. Within the same month, the Beaumont Health System and Henry Ford Health System announced a letter of intent to combine, totaling $4.6 billion.

According to Moody Investors, consolidation is viewed as positive overall, leading to greater efficiencies and reduced long-term hospital operating costs. However, Forbes.com presents a different view, proposing that hospital mergers actually increase health costs, which is explained further in a flowchart:

Yet, still others insist that wasted dollars in the healthcare industry is due to ‘extreme fragmentation’ as Mlive.com reports, according to Charlie Whelan, healthcare director at market research firm Frost & Sullivan. Merging healthcare systems intuitively seems like it would positively impact patient care by pooling resources and allowing for greater standardization, and potentially reducing health information exchange risks.

When it comes to health IT, mergers and acquisitions pose the issues of lack of interoperability and EHR system integration within the industry. According to HealthcareITNews.com, studies have proven that mergers show failure rates of more than 50 percent. The problem may be with the great diversity and sheer number of different products, platforms and operating systems, and the inability to establish interoperability between two different hospitals’ health IT systems.

Although difficult, if done efficiently, it is possible for health IT interoperability to be successful, and overall, help reduce healthcare costs. How can it be done? Standardization, reduction of optionality and technology for accurate translation. Integration profiles, a collection of information exchange protocols, can translate one machine’s way of saying something into what the second machine can understand.

According to BeckersHospitalReview.com, the Office of the National Coordinator for Health IT has greatly reduced optionality in health IT across the board in order to create a more simple framework to support interoperable health information exchange. For example, lab results now have a single lab result specification, and the Health IT Standards Committee has one recommended standard for public health reporting. Similarly, a single vocabulary for administrative, clinical, lab and medications domains has their own recommendations for the industry-standard way of communicating.

Interoperability also requires securing data by complying with HIPAA, according to BeckersHospitalReview.com. Each participating provider should be aware of the security requirements under the HITECH Act, and, if outsourcing, should only entrust their data hosting services to a HIPAA compliant hosting provider that has undergone an independent HIPAA audit.

Find out more about securing electronic health information (ePHI) in our HIPAA Compliant Hosting white paper.

Moody’s Weekly Credit Outlook: US Public Finance Edition (PDF)
In 2012 Michigan is a Hotbed of Hospital Affiliation/Acquisition Activity
Analyst: Detroit Hospital Merger May Hurt Short Term, But Better for Everyone in the Long Run
How Hospital Mergers Increase Health Costs, and What to Do About It
ONC Reduces Optionality to Support Interoperable Health Information Exchange

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