Jefferson Health Systems and Abington Health officials say the letter of intent to merge that they signed this week positions them better for changing payment models under the federal health care overhaul.
Together, the merged system would have more than 1,751 beds at five hospitals in Center City and Montgomery County, and would employ 19,000 people there and at a host of outpatient facilities.
Abington CEO Larry Merlis also envisions adding brand-new clinics to the potential new system that are more convenient for patients.
“We expect to see additional ambulatory and outpatient sites that are closer to home or where people work,” Merlis said.
Under the U.S. changes, health systems are penalized for hospital readmissions and rewarded for keeping health care costs down.
Both measures incentivize making it easier for patients to get to their follow-up appointments and coordinating care between many doctors in a consolidated system.
“We should be providing the right care at the right time at the right location for the right price,” Merlis said.
Health care policy expert Rob Field said Philadelphia is catching up to a national trend of consolidation brought on by the Affordable Care Act.
“In a sense there aren’t that many low-hanging fruit to be plucked, a lot of them were plucked in the ’90s,” Field said. “Abington is one of the notable exceptions. It’s a major hospital out in the suburbs that has so far kept independent of the major systems, so it’s a very logical target for the next round of consolidation.”
Field, a Drexel health management and policy professor, said changing reimbursement policies make health system consolidation a natural choice right now.
In this case, a merger extends the geographical reach of both hospitals.
“Abington does have a suburban area north of Philadelphia that Jefferson doesn’t reach right now,” Field said. “If you want to keep your patients healthy at home, away from the hospital, the broader the geography that you have influence over, the better.”
Mergers can drive costs down by providing more coordinated care, as well as cutting down on duplicate tests and procedures. But they can also raise costs by giving larger health systems more bargaining power with insurers.
If a merger goes through, Abington’s Merlis said it would likely be finalized in the second quarter of next year.
The preliminary merger agreement outlines equal representation for Abington and the much larger Jefferson on a new board.
On Friday, Holy Redeemer Health System, Abington’s main Montgomery County rival, said it is, and has been, looking to potential partnerships and collaborations as well.
“Partnerships and consolidation of health systems are national trends that we will continue to see in our local market,” said Michael B. Laign, president and CEO of Holy Redeemer, in an emailed statement. “Holy Redeemer continues to evaluate potential partnerships and collaborations with physicians and other organizations in both Pennsylvania and New Jersey that are committed to superior outcomes, innovative care and unparalleled experiences.”