Organizational Dynamics and Complexities in Healthcare Organizations

Introduction

Hospital mergers and acquisitions have been increasingly prevalent over the last decade and have accelerated since COVID-19. Between 2010 and 2018, 778 hospital mergers and 90% of metropolitan cities are considered highly concentrated according to the Herfindahl-Hirschman Index [HHI] (Schwartz et al., 2020). The benefits of hospital mergers and acquisitions are frequently debated. At the same time, most agree that hospital consolidation increases patient prices overall. In addition, it improves the quality of care and care coordination (Rangachari & Lashbrook, 2019; Schwartz et al., 2020). However, despite these uncertainties, hospital mergers and acquisitions are especially important for financially struggling hospitals. In the 2015-2019 American Hospital Association [AHA] (2021) annual survey, the critical driver for consolidation was due to financial distress or challenge. Additionally, more than one-third of these hospitals had declared bankruptcy, and consolidation saved 80% of these hospitals from bankruptcy (AHA, 2021). For these hospitals, consolidation allows them to preserve access to care.

Many of these hospitals that experience consolidation are rural hospitals. Between 2010 and 2021, 136 rural hospitals closed (AHA, 2022). Today, 673 hospitals have been identified as vulnerable to closure, and 355 are located in markets with high health disparities (AHA, 2022). Rural hospitals support their communities through economic activity by supplying jobs and fostering spending on healthcare services (AHA, 2022). The impact of these closures is detrimental to these communities. The closures are caused by poor financial performance, lack of Medicaid expansion, and the high percentage of insured and government programs (AHA, 2022). In addition to financial performance, rural hospitals face unique challenges, including workforce, regulatory, and coverage challenges (AHA, 2022). Due to these challenges, rural hospitals are often resourceful and innovative to combat these hardships to remain financially viable, including by undergoing mergers and acquisitions (AHA, 2022).

Rural hospitals have unique characteristics compared to non-rural hospitals. From a demographic perspective, rural hospitals serve poorer, sicker, and older populations than non-rural hospitals (Williams et al., 2020). Rural hospitals have lower volumes and profitability, face provider recruitment and staffing challenges, and offer fewer services than non-rural hospitals (Williams et al., 2020). In rural hospitals, change is often resisted by patients and stakeholders because of the patient population served and the economic activity rural hospitals provide their communities (Williams et al., 2020). Therefore, change within rural hospitals resulting from an acquisition can be challenging to overcome, given the unique characteristics and culture of rural hospitals (Rangachari & Lashbrook, 2019; Williams et al., 2020).