“Community responds to EHC-WellStar merger”

As published in the Emory Wheel on April 16, 2015

Written by: Annie McGrew

Two of the largest health care systems in Georgia, Emory Healthcare and WellStar Health System, will merge to create the largest health care system in the Southeast.

While CEO and President of Emory Healthcare Michael Mandl said the Emory Healthcare-WellStar merger will increase efficiency, some worry that the new entity’s large share of market power will lead to higher consumer costs.

The Board of Trustees of both WellStar and Emory’s Executive Committee have started to design the new, unified health care system, according to an April 2 University press release. Mandl said he expects the design process to last about a year.

“We are pursing [the merger] for all the right reasons for society, which is to increase the value of the health care delivery system and keep people healthy, cost effectively,” he said, adding that the merger aims to “create the model health system for the future.”

That system includes five components, such as providing diverse care for a large population, multiple locations for care, talented physicians, a robust clinical and supporting database and research.

The Qualms

Beth Stephens, Health Access Program director at Georgia Watch — an Atlanta-based non-partisan consumer advocacy group that keeps hospitals accountable for their decisions, said that although the new system could increase coordination and transparency, she is concerned the merger could increase prices without an equal increase in care.

“We want to ensure [taxexempt entities] … keep the community at the forefront of their thoughts,” she said, referring to the fact that both companies are not-for-profit. “Non-profit hospitals have a responsibility to give back to the community.”

She highlighted that it is important for WellStar and Emory Healthcare to be as transparent as possible throughout the process, adding that the Affordable Care Act has incentivized similar consolidations nationwide.

“I don’t know that the Hospital did the most it could to publicize [the discussion period],” she said, referring to the month and a half period beginning in February that the boards collected comments from patients, physicians, employees and any other interested persons. Stephens said that Georgia Watch found out about the discussion period indirectly.

Designing the Consolidation

Now that the design phase has been initiated, the next steps include outlining the leadership and support structure, identifying the Board of Trustees’ members and finding a name and location for corporate headquarters, according Mandl.

Mandl also said that building new facilities will likely not be in the plans for the initial design phase.

“That’ll be in the future,” Mandl said of the new facilities. “The idea would be to grow the system over time.”

The design phase will end with the approval from the boards but will include “decision points” along the way in communication with the boards.

The Research

Associate Professor at University of Colorado’s Department of Health Systems, Management and Policy Richard Lindrooth said he was surprised by the size of the merger and noted that Emory Healthcare and WellStar are “two pretty large systems coming together.” 

He said the Federal Trade Commission may look into the merger to ensure it will not interfere with antitrust laws. Mandl said Emory does not expect to face hurdles during that process.

Lindrooth’s research into the cost impacts of mergers found mixed results but did indicate that a merger between two independent hospitals can often lead to lower costs, because the merger can eliminate duplicate processes. However, his research found that mergers of two systems that own multiple hospitals — such as Emory and WellStar — do not significantly cut costs unless there is significant integration between the two systems.

He added that health insurers may not be able to bargain for lower prices, because a merger decreases their options.

“Previously they may be able to negotiate separately with Emory Healthcare and WellStar and even perhaps play them off each other in the negotiations,” he said. “If there’s not another similar health system within the market   at least one, ideally more  then prices would increase.”