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By Anne Freedman, senior editor of Risk & Insurance®

The increasing mergers and acquisitions in the health care industry are changing the landscape and making organizations more vulnerable.

"The future of health care is difficult to predict pending the election," said Mary Anne Hilliard, president of ASHRM and chief risk counsel and vice president, Safety and Patient Experience at Children's National Medical Center in Washington, D.C.

But, regardless of who wins the presidency -- and regardless of whether the Patient Protection and Accountable Care Act remains the law of the land -- consolidation of hospitals and health organizations will continue, she said.

"There's no stopping it," Hilliard said.

Last year was the "fourth largest year for M&As for healthcare", said Russ Nassof, founder of RiskNomics, which offers consulting on emerging environmental issues for the insurance industry.

Along with that trend has been a general shift toward the increased use of outpatient facilities. And, he said, that is where the "vast majority" of patient safety outbreaks occur.

The use of such outpatient facilities will only increase with the rise of Accountable Care Organizations, which were created by the PPACA, he said, as the law offers incentives for more integrated facilities.

Dr. Joseph Perz of the Centers for Disease Control and Prevention, said there were 1.1 billion visits to outpatient facilities such as ambulatory surgery centers from 1996 to 2006.

Such facilities -- which can range from liposuction to oncology clinics -- may be "somewhat, perhaps, lacking in the safety arena, especially in regards to infection control."

He noted the current outbreak of meningitis, which has killed 15 people and infected more than 200, stemmed from the use of an external pharmaceutical facility to create a compounded medication that was contaminated.

Often, Nassof said, it's a "lack of awareness" of safety issues. And often, he said, there is little regulatory oversight of outpatient care facilities. Sometimes, he said, only a business license is required to open a facility.

"It's pretty scary when you think about it," Nassof said.

Cindy Oard, senior vice president and healthcare practice lead at Allied World Healthcare, said the M&A activity is both horizontal and vertical, noting that it is being undertaken to create efficiencies, aggregate resources and help with financial pressures.

"It's not just one hospital acquiring another," she said. "There are some unique acquisitions going on out there," including purchasing physician groups, surgery centers, laboratories, long-term-care providers and other ancillary lines.

"I think the impact is thinking differently about health care. ... It's kind of this aggregation of the industry," Oard said.

At this point, said Craig Rowland, vice president and chief technical underwriter at the Medical Protective insurance company, two-thirds of hospitals own a physician group or some other medical provider facility.

Adding to their risks, he said, is the integration of groups amid an environment of pressure to cut costs and a "declining revenue model," due to the move from reimbursed care to performance-based care.

"Any time you are in a period of change," said Holly Meidl, managing director and U.S. national practice leader for health care at insurance broker Marsh, "you increase your risk."

The acquisition of physician groups is "still going gangbusters," she said, noting that she had recently seen reports stating that 50 percent of all physicians are now employed rather than having their own practices. "This is a huge shift for the industry," she said.

When similar organizations merge, it doesn't significantlychange the risk profile, Meidl said. "It's when they [become involved] in areas they haven't been involved in or they are picking up [different] parts of the [health care] continuum, that's when they are adding to their profile, ... when they have to look at this and say, 'Do I know what all the risks are?' "

When a hospital buys a rehabilitation company, for example, it may begin dealing with the development or customization ofprosthetics for the first time and be exposed to product liability as well as different regulations and compliance issues, she said.

Denise Fitzpatrick, senior vice president in Marsh Risk Consulting's Clinical Healthcare Consulting Practice, said the health care landscape is changing so rapidly, there is little precedence to rely on.

"Everybody is doing it a little differently," she said. "There's not one model you can take and use across the board."

October 15, 2012

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