A few months back, Banner Health's recent expansions into outlying parts of the Phoenix metro area pointed in an intriguing direction: Tucson. Despite the possible stepping stone of purchasing Casa Grande Regional Medical Center between Phoenix and Tucson, it wasn?t clear how Banner would enter the southern Arizona market.

Since then, Banner has shown its hand. The health system is in negotiations to acquire the University of Arizona Health Network, a two-hospital system in Tucson that includes the academic medical center of the University of Arizona College of Medicine.

But Banner is not the only health system poised to take its operations statewide. Tenet Healthcare and Dignity Health, which both have several hospitals in Phoenix, plan to participate in a joint venture for the ownership of three-hospital Carondelet Health Network in southern Arizona. Carondelet's current owner, Ascension Health, would be part of the joint venture as well.

Both merger deals are likely to advance healthcare reform in Tucson by introducing accountable care organizations that Banner, Tenet, and Dignity already operate in Phoenix.

A few years ago, either of these deals would have been improbable. But the implementation of healthcare reform has led to strange bedfellows, and perhaps some unintended consequences resulting from health system consolidation. While the expansion of ACOs and reimbursement reform is certainly a goal of the Affordable Care Act, larger provider networks give health systems greater negotiating power with payers and the potential to demand higher prices that could drive up the cost of care.

It's a tension point that healthcare reform has created in markets across the nation: Health systems feel pressure to merge and develop creative partnerships to implement the very reforms that are meant to drive greater efficiencies and control costs.

In Arizona, these deals are likely to intensify competition in the Tucson market and provide more stability for hospitals that have been struggling financially. But in the end, how affordable will the results be?  

Follow Bill Melville on Twitter @BillMelvilleDRG

DRG becomes Clarivate

View Now