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Many facilities within healthcare systems continue to operate with a high degree of autonomy, rather than as part of the integrated company.

Most hospital executives continue to wield significant control over operations within their facility, and they make decisions to improve the performance of that facility, rather than collaborating to achieve the broader objectives of the entire system.

As a result, facilities within a system effectively compete against one another, and often have conflicting marketing and promotional campaigns that cannibalize volume among them.

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The implicit logic of these arrangements is that by getting larger, hospitals and healthcare systems will generate scale and reduce operating costs while still delivering the same level of care — or better.

hospitals have undergone a continuous wave of consolidation, seeking to become more profitable through mergers, partnerships, and other strategic alliances.

In many transactions, there is no pressure on management to identify and realize synergies (especially given that some healthcare system mergers do not involve shareholders and investors pressuring managers for rapid results).

The final explanation for a lack of system-wide scale is that management teams are focused primarily on the short-term objective of closing the deal, rather than the longer-term task of integrating the new acquisition into the existing system.

Moreover, we have found that there is little or no correlation between a healthcare system’s cost structure and the quality of its care.

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