In its 2010 Governance Institute white paper, Juniper Advisory described the ownership structure of the hospital industry in anticipation of the impact of healthcare reform and the Affordable Care Act (ACA) on hospital consolidation.¹ Leading up to enactment of the ACA, health policy experts had concluded that the U.S. healthcare delivery system was consuming too great a share of the economy. Essentially, the industry was viewed to be too expensive for the country and patients, and providing mediocre health outcomes. These factors were the economic rationale for healthcare reform and, eventually, implementation of the ACA.

In 2010, the ACA was viewed to have two primary objectives: control the cost of healthcare and provide improvements to the healthcare system including expanding the number of people with insurance coverage and adding safeguards for patients. The hospital industry believed that the ACA would impact the economics of the industry in two fundamental ways. First, the cost of doing business would increase as the industry moved from fee-for-service to a value-based structure. Second, reimbursement would decline as Medicare rates were reduced.

As a result, it was believed that the ACA might significantly increase consolidation between hospitals and result in the creation of larger systems of care so as to achieve economies of scale. Juniper felt this could result in more transactions, larger transactions, interstate transactions, and more transactions involving non-profit buyers. Further supporting the notion of creating larger companies, evidence suggested that better health outcomes were achieved by larger organizations that were able to devote greater resources to standardizing protocols. Now, more than six years into the ACA, and at the beginning of likely change to it, it is useful to consider the impact of the ACA on the ownership of the industry and its level of concentration.

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