Competition and Integration of US Health Systems in the Post-COVID-19 New Normal: Cross-sectional Survey.

Background: How do health systems in the United States view the concept of merger and acquisition (M&A) in a post-COVID 19 "new normal"? How do new entrants to the market and incumbents influence horizontal and vertical integration of health systems? Traditionally, it has been argued that M&A activity is designed to reduce inequities in the market, shift toward value-based care, or enhance the number and quality of health care offerings in a given market. However, the recent history of M&A activity has yielded fewer noble results. As might be expected, the smaller the geographical region in which M&A activity is pursued, the higher the likelihood that monopolistic tendencies will result.

Objective: We focused on three types of competition perceptions, external environment uncertainty-related competition, technology disruption-driven competition, and customer service-driven competition, and two integration plans, vertical integration and horizontal integration. We examined (1) how health system characteristics help discern competition perceptions and integration decisions, and (2) how environment-, technology-, and service-driven competition aspects influence vertical and horizontal integration among US health systems in the post-COVID-19 new normal.

Methods: We used data for this study collected through a consultant from a robust group of health system chief executive officers (CEOs) across the United States from February to March 2021. Among the 625 CEOs, 135 (21.6%) responded to our survey. We considered competition and integration aspects from the literature and ratified them via expert consensus. We collected secondary data from the Agency for Healthcare Research and Quality (AHRQ) Compendium of the US Health Systems, leading to a matched data set for 124 health systems. We used inferential statistical comparisons to assess differences across health systems regarding competition and integration, and we used ordered logit estimations to relate competition and integration.

Results: Health systems generally have a high level of the four types of competition perceptions, with the greatest concern being technology disruption-driven competition rather than environment uncertainty-related competition and customer service-driven competition. The first set of estimation results showed that size, teaching status, revenue, and uncompensated care burden are the main contingent factors influencing the three competition perceptions. The second set of estimation results revealed the relationships between different competition perceptions and integration plans. For vertical integration, environment uncertainty-related competition had a significant positive influence (P<.001), while the influence of technology disruption-driven competition was significant but negative (P<.001). The influence of customer service-driven competition on vertical integration was not evident. For horizontal integration, the results were similar for environment uncertainty-related competition and technology disruption-driven competition; however, the significance of technology disruption-driven competition was weak (P=.05). The influence of customer service-driven competition in the combined model was significant and negative (P<.001).

Conclusions: Competition-driven integration has subtle influences across health systems. Environment uncertainty-related competition is a significant factor, with underlying contingent factors such as revenue concerns and leadership as the leading causes of integration plans. However, technology disruption may hinder integrations. Undoubtedly, small- and low-revenue health systems facing a high level of competition are likely to merge to navigate the health care business successfully. This trend should be a focus of policy to avoid monopolistic markets.