Hospital consolidation has been very robust in the US over the past decade and is expected to accelerate. From 2008 to 2014 there were 750 mergers. Today, 60% of the 5000 hospitals in the US are part of systems, yet the results of consolidation are mixed:
- Operating margins typically decline in the two years post-merger
- Quality performance does not demonstrate expected improvement
Hospitals that did achieve positive results from their M&A activity generally focused on pre-merger planning that involved all hospital leadership with clear goal setting and an emphasis on cultural integration. Most system consolidations focused on reducing costs through centralization of support functions such as IT, purchasing, accounting and human resources. However, there has not been much focus on how systems can leverage their size and expertise to improve service line performance. With most hospitals generating between 50 and 60 per cent of their revenues and 30 to 40 per cent of their costs from perioperative services, a focus on those services can significantly improve the financial benefits from consolidation.
Focus on perioperative services can impact system performance and generate a positive return on consolidation
How do mergers impact the organization and delivery of perioperative services? In looking at 400 hospitals surveyed by Surgical Directions, most Perioperative Departments day-to-day operations are not significantly different pre- and post-merger. There is emphasis on consolidating purchasing functions with approved vendor lists but little standardization of OR governance, operating systems, or clinical protocols. Systems have typically had a hands-off policy with service delivery. Consequently, systems are missing a significant opportunity to improve clinical, financial, and operating performance by not looking at perioperative performance from a system perspective. These opportunities could include:
- Establishing system and local hospital perioperative governance committees
- Developing system wide metrics to measure patient satisfaction, clinical outcomes, operating and financial performance
- Leveraging key processes such as pre-anesthesia optimization, ERAS, and multidisciplinary daily huddles
- Creating Surgical Homes to organize and deliver care for key surgical procedures such as orthopedic (e.g., total joint replacements), spinal, colorectal, and cardiovascular surgeries
An often overlooked opportunity is creating a system-wide business management function for perioperative services. Most hospital with significant OR volume understand the benefits of having an on-site business manager to oversee perioperative services, yet there are additional benefits from having system-wide business management resources. A system-wide Director of Perioperative Business Management can develop operations dashboards that enable aggregate and cross-hospital comparative analysis, provide business management support for smaller facilities, and implement standardized best practice business processes across the system. The skills and time needed to develop and provide these tools exceed the capabilities of many systems today in lieu of creating this specialized role.
How to get started
A good way to evaluate the right mix of system-wide versus local hospital responsibility for perioperative services is to create a system level Surgical Services Executive Committee. The system level committee should have a mix of local hospital and system representatives. Individual hospital Medical Directors of Perioperative Services, OR Directors, Business Management and key system operational leadership should be included. Additionally, the system Chief Medical Officer, Chief Nursing Officer and COO should be members. The system-wide SSEC develops measurable financial, operational and clinical goals for perioperative services. The committee then provides any needed support to ensure all hospitals within the system are meeting or exceeding these goals.
Focusing on improving the performance of systems’ key service lines such as Perioperative Services improves financial performance and clinical outcomes and helps demonstrate the value of the system to hospital members and the patients that they serve.