The Human Costs of Mergers - Emerging Nurse Leader

By Rose O. Sherman, EdD, RN, NEA-BC, FAAN

It seems that each week, there are more announcements about impending mergers of health systems. The American Hospital Association recently released a study that indicates that mergers have the potential to achieve results in the following three areas:

Mergers decrease costs due to economies of scale, reduced costs of capital and clinical standardization among other efficiencies. An empirical analysis showed a 2.5 percent reduction—equating to $5.8 million—in annual operating expenses at acquired hospitals.
Mergers have the potential to drive quality improvements through standardization of clinical protocols and investments to upgrade facilities and services at acquired hospitals.
Mergers typically expand the scope of services available to patients, and build upon existing institutional strengths to provide more comprehensive and efficient care.

Not everyone agrees with this assessment. Some healthcare economists believe that the reduced costs are short-lived. Depending on the market, consolidation can lead to decreased competition and increased prices leaving consumers with less choice and sometimes inferior care. Highly consolidated hospital systems charge as much as 40 percent more for procedures compared to smaller hospitals.There is also a concern that when hospitals are part of mega systems, there is far less concern about the specific needs of a community. Nurse leaders that I have spoken to that have experienced these transitions share that once they are part of a large system – executive decision making shifts to a different organization level and plans/initiatives get handed down with little input. They feel a loss of control and decision making.

Less frequently discussed are the human costs at the staff level that often happen with two organizations with different value systems and goals form a partnership that leads to a merger. Sometimes, the outcomes are very good from a staff perspective especially when the organization that drives the merger has a strong employee culture and excellent benefits. But this is not always the case. Recently, a frontline nurse leader talked with me about a merger taking place in her organization. It was reeking havoc with the staff because of substantial changes in benefit plans and staffing levels. The turnover rate in the acquired organization had skyrocketed and recruitment was difficult. Vacancies were being filled by using travelers.

This leaders perceptions are well founded. The number of R.N.s and L.P.N.s clearly decreases after a true hospital merger says Christina DePasquale, an economics professor at Emory College and author of “The Effects of Hospital Consolidation on Labor Market Outcomes. R.N.s decrease by around 12% and L.P.N.s by around 18%, says DePasquale, and numbers at their hospitals do not rebound over time. This could be due to nurses getting another job in a physician’s office or similar non-hospital setting, moving labor markets, or leaving the labor market altogether.

Is bigger better and will the urge to merge continue? Time will tell but we need research to study the impact of mergers on our workforce and its leaders.