Correspondence
The Folly of Teaching-Hospital Mergers
N Engl J Med 1997; 336:1762-1763June 12, 1997
- Article
To the Editor:
As the great academic health care centers of the United States respond to a marketplace increasingly driven by finances, in which the cost per unit of service becomes the key measure of interest to managed-care organizations, there is concern that our long-standing commitment to teaching, research, and care for the uninsured will be eliminated. Mergers between academic medical centers, motivated by declining revenues and market share as a result of the centers' high costs, create understandable anxiety among academic leaders, given the difficulty of quantitatively assigning value to these public goods.
The proposed merger between the New York Hospital and the Presbyterian Hospital is not driven by a need to reduce costs. Indeed, we believe that by adapting the best clinical practices of both hospitals and applying them throughout our networks of affiliated hospitals, we will be able to improve patient care. Moreover, we anticipate that joining the hospitals and their networks will expand our accessibility, making our collective services available to more patients. Finally, although some reductions in cost are anticipated as a result of the consolidation of selected hospital support services, these savings are not an imperative. Bringing the two hospitals together, with their high-quality product and enhanced market share, will continue to provide the revenues needed to maintain our commitment to teaching, research, and the provision of uncompensated care.
Andreopoulos (Jan. 2 issue)1 misinterprets the purpose of this proposed merger and takes out of context my remarks to the Wall Street Journal. 2 Specifically, my comment relating our proposed merger to a hypothetical merger between Coke and Pepsi was intended to emphasize the value of the brand names of the two hospitals and my belief that blending those two soft drinks into a new product would be foolhardy. The New York Hospital and the Presbyterian Hospital each have unique traditions, characteristics, and established customer bases; any attempt to blend them into a new, homogeneous hospital unit would likewise be foolhardy.
Dr. David Skinner, president and chief executive officer of New York Hospital, and I are aware of the unique characteristics of the health care marketplace in metropolitan New York, the value of the academic enterprise, and the need to craft a strategy that will ensure that these two great academic medical centers and their medical schools will prosper in the next millennium.
Finally, Dr. Skinner prefers Pepsi, whereas I have a preference for Coke. Neither of us plans to switch.
2 ReferencesWilliam T. Speck, M.D.
Presbyterian Hospital, New York, NY 100321
Andreopoulos S . The folly of teaching-hospital mergers. N Engl J Med 1997;336:61-64
Full Text | Web of Science | Medline2
Lagnado L. Top New York medical centers to merge. Wall Street Journal. July 25, 1996:B11.
To the Editor:
Andreopoulos leaves the impression that mergers and consolidations of teaching hospitals threaten medical schools and their educational and clinical research programs, place deans and faculties at the mercy of hospital bureaucrats with a “bottom-line” mentality who ignore the academic mission, and in any case, do not appreciably improve financial performance.
For the past two years, my colleagues at Stanford University and the University of California at San Francisco (UCSF) and I carefully considered the ramifications of a possible merger. We reached quite different conclusions from those of Andreopoulos. Although he asks a number of important questions, the complex situations academic medical centers face are not ameliorated by simplistic solutions on which society cannot, in any case, agree, or by discussion that inflames but does not inform. In fact, we did ask whether merging makes sense for us. After studying that question for countless hours, we found the answer to be a resounding yes.
In an increasingly competitive health care marketplace, the leaders of Stanford University and UCSF recognize that the status quo is not tenable. Both institutions must deliver high-quality care more cost effectively if they are to continue to support the academic missions of the schools of medicine. After Stanford and UCSF first considered a merger, two nationally recognized health care consultants and an independent review team examined the data and concluded that a merger would mitigate risks and enhance academic opportunities. Merging will result in economies of scale, a reduced need for duplicate investments, and an improved ability to compete for patients. This, in turn, should allow the clinical enterprise to continue to support research and education and should ensure an adequate patient base for education.
The clinical enterprises at Stanford and UCSF exist to support the academic needs of the schools of medicine. A merger will not change that focus. The governing board of the merged entity will include the chancellor of UCSF, the president of Stanford, the deans of the two schools of medicine, and a faculty member from each school. I am confident that the two schools' core missions of education, research, and clinical practice will remain of paramount importance.
Eugene A. Bauer, M.D.
Stanford University School of Medicine, Stanford, CA 94305Author/Editor Response
Mr. Andreopoulos replies:
To the Editor: I have no doubt that academic leaders pursuing mergers have good intentions. Neither Speck nor Bauer, however, has refuted my contentions that mergers are a short-term expedient whose risks are underexamined, and that they involve an uncertain financial prognosis and a potential dilution of the unique missions of academic medicine.1
In the past 10 years, about 300 mergers of industrial organizations took place in the name of efficiency. Few of those have even come close to improving the situation, and 57 percent of the merged firms have crumbled. One of many reasons for the unhappy outcome of these couplings is that complexity and inefficiency increase logarithmically after a merger.2 Contrary to the questionable view that Stanford and UCSF, separated by a distance of 45 miles, would deliver high-quality care more effectively, their marriage would create an even more lumbering entity. The addition of public service, such as medical education, research, and caring for the poor, complicates the situation for academic centers by an order of magnitude.
Bauer contends that the Stanford–UCSF merger would reduce the need for duplicate investments, but he does not explain why Stanford and UCSF currently plan separate new cancer centers. He expects the merger to mitigate risks and enhance academic opportunities, and he counts on the governing board to support the academic focus. I do not doubt that the board will strive to support the medical schools. Under the affiliation agreements, however, the board will now determine the amount of the academic contribution to the schools in the context of its annual budget.3 In short, no guarantees are given. For this reason, faculty members at both institutions are concerned about the makeup of the board.4 It has 17 members, and only 2 are on the faculty. The majority are university administrators and captains of industry who may have little interest in an enterprise such as academic medicine, which relies on intellectual precision and community service, not marketing principles.
Mergers generate distrust because of the secrecy that surrounds them. Bauer implies that the faculty was consulted before the decision to merge. But leaders of Stanford faculty committees set up to determine post-merger strategy have publicly acknowledged that “a common problem is a lack of information about the merger in general.”5 The trustees' approach — “we made the business decision, it's now up to the faculty to make it work” — simply makes scapegoats of faculty members.
5 ReferencesSpyros Andreopoulos
Stanford University Medical Center, Stanford, CA 943051
Andreopoulos S . The folly of teaching-hospital mergers. N Engl J Med 1997;336:61-64
Full Text | Web of Science | Medline2
Why too many mergers miss the mark. Economist. January 4, 1997:57-8.
3
UCSF Medical Center-Stanford Health Services proposed merger of clinical enterprises: third party review. UCSF Regents Report (Open Session Version). November 8, 1996:1-90.
4
Jones-Bey H. Bauer, UCSF guest speakers discuss merger concerns. Stanford Report. January 29, 1997:8-9.
5
Kemezis A. Three committees appointed to look at merger. Stanford Daily. January 8, 1997:1, 14.
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