When you go to Navicent in the future, a different company might be in control

Navicent Health’s power to make decisions locally could be in jeopardy.

Macon-based Navicent has agreed to a “strategic combination” with Atrium Health, a giant North Carolina-based health care company.

And that’s triggering a lot of concern here.

When a much larger company joins with a smaller one, the larger company will likely dictate what the smaller entity does, Macon-Bibb County Commissioner Mallory Jones said Friday.

"The larger one takes over the smaller one. The larger one will rule," he said. "I’ve never seen an exception to that."

Navicent and Atrium officials declined to comment during what they call the "silent phase" of negotiations.

But Navicent officials have publicly stated in the past that the even after the combination with Atrium, there will still be local decision makers looking out for the best for Navicent and the people it serves.

"We want to be a regional hub," Navicent president and CEO Ninfa Saunders said at a Feb. 27 County Commission meeting. "If we partnered with hospitals in Atlanta, we would be a spoke, and what happens if you’re a spoke? You’re told what to do.

“By being a regional hub, we will be able to develop the market in a way that’s still fitting to serve the state of Georgia.”

Some experts have expressed doubts about the trend of hospital systems consolidating.

“There’s very little evidence that these consolidations create efficiencies or help consumers,” Duke Law School professor Barak Richman told The Charlotte Observer in April. “There is growing evidence that they increase prices. And, in my view, it is taking the health care delivery system in the wrong direction.”

Atrium had a deal fall through to join with the UNC Health Care, which would’ve led to a system with $14 billion in annual operating expenses and 90,000 employees.

In comparison, Navicent's revenue in 2016 was $750 million. The hospital has 4,600 employees.

Navicent primarily depends on Medicare reimbursements to cover expenses, but the hospital's revenues have taken a major hit since the Affordable Care Act went into effect, Saunders said in February.

“We’re not making as much money,” she said.

Atrium officials have previously said the combination with Navicent is not uncommon in the industry and would allow the larger system to assume the liabilities of the smaller company.

That could benefit Navicent because a hospital system is more likely to get a better credit rating from agencies when that system is valued at $3 billion or higher.

"In turn, a deteriorating credit rating can set off a downward spiral in performance, as the hospital becomes unable to make investments to maintain or upgrade its physical plant and equipment and to recruit physicians and other clinical staff," said a study commissioned by the American Hospital Association. "An inability to reinvest often makes struggling hospitals less attractive to their medical staffs and to patients."

Merger studies

Two reports on the health care industry tout the benefits of hospital mergers in areas like saving money, reducing the length of hospital stays and developing better practices benefiting patient services.

In 2017, the American Hospital Association released the Charles River Associates study. Another report released last year was a collaboration between the Deloitte's Center for Health Solutions and the Healthcare Financial Management Association.

One hospital, the Charles River study noted, saved $50 million through an intervention approach it attributed to a merger.

The report, however, also found that those same results are not as likely with "looser affiliations" in which the companies are not financially bound together.

The hospital industry has changed over the last decade with more than 750 mergers or acquisitions taking place from 2008-2014, according to the Deloitte study.

Some of the most common reasons for hospital mergers and acquisitions are to have more money for capital improvements, increase a hospital's market share and to become more efficient, the Deloitte study said.

Sixty-percent of the nation's 5,000 hospitals are now part of a healthcare system.

"Of the 90 hospital executives who completed the survey, 49 said the acquired hospital experienced improved care quality, and 25 said the acquired hospital achieved at least 50 percent of the transaction’s anticipated cost savings," the Deloitte study said.

Within the first two years of a merger, the hospitals that were acquired on average saw a decrease in operating margins, revenue and expenses before there was a turnaround, according to the Deloitte report.

This story was originally published June 8, 2018 at 1:47 PM with the headline "When you go to Navicent in the future, a different company might be in control."