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Ask the expert: To merge or not to merge? Dispelling another myth

Medical Staff Leader Connection, August 20, 2008

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Last week, we dispelled a common misconception that hospitals often subscribe to when considering a merger: that being in a larger entity automatically means you have more control when negotiating payer rates. This week, we are dispelling another myth, which might surprise you.

Myth: Larger groups guarantee immediate savings.

Truth: The reality is that unless the merging organizations commit to combining their facilities, overhead costs will not decrease. In fact, costs generally increase as the merged organization takes advantage of combined capital to buy products and services they couldn’t previously afford, such as higher-level management, technology, and ancillary services. You may make more money in a merger, but not because costs go down. You’re going to do it because you can do things together that you couldn’t do separately.

This week’s question and answer are excerpts from The Medical Staff Leader’s Practical Guide, Sixth Edition, by William K. Cors, MD, MMM, FACPE, CMSL; Mary J. Hoppa, MD, MBA; and Richard A. Sheff, MD.

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