Photo: Michael C. Riordan, former head of Greenville Health System. Gallery: Charles D. Beaman, former leader of Palmetto Health.

By Chris Haire

This is not the last story you’ll read about the partnership between Greenville Health System and Palmetto Health. It is not the definitive word on the resulting formation of a new entity, South Carolina Health Company, bringing together these two large nonprofit entities, one a dominant player in the Upstate, the other a major medical company in the Midlands. And chances are, it won’t be the last time this partnership will be debated by those who oppose it and those who support it. 

According to S.C. Health Company—and that may be just a temporary name—the new health system will be able to serve 1.2 million patients a year and will have 28,000 employees, with approximately 14,000 coming from both GHS and Palmetto Health. S.C. Health is also partnered up with the University of South Carolina School of Medicine, which has a campus in Greenville, and is affiliated with Palmetto in the Columbia area.

Combined, the two systems will comprise 13 hospitals and scores of other practices and facilities, and according to S.C. Health, some 2.5 million South Carolinians will be within 15 minutes of a physician’s practice underneath the health system’s umbrella, making it the single largest private employer in the Palmetto State.

One unique feature of S.C. Health: the new company will be headquartered in two different cities, Greenville and Columbia, with the former head of GHS, Michael C. Riordan, and the previous leader of Palmetto Health, Charles D. Beaman Jr., taking the green-scrub reins of the combined system. 

But what does all of this mean to Upstate residents and their pocketbooks, and how does it fit into the recent wave of hospital mergers?

For starters, let’s get one thing out of the way: the folks at S.C. Health System are adamant that this new company is not the product of a merger. It’s an affiliation. And they have reasons for why they are something completely different. 

No. 1: Current GHS patients will remain GHS patients, while current Palmetto Health patients will stay Palmetto patients; the companies will remain separate systems underneath an overseeing parent company. 

No. 2: To quote the S.C. Health site, scbettertogether.org, “In a merger, one entity becomes part of the other entity, which is not the form of this transaction.”

For the folks at S.C. Health, this is a reason for South Carolinians to celebrate. It’s all part of an ambitious plan to improve healthcare in the Upstate and the Midlands—and to keep out-of-state entities from buying up either of the two systems. 

“As a mission-driven organization committed to caring for urban, suburban, and rural community members, the new company brings together the strengths of both healthcare systems—Greenville Health System and Palmetto Health—to improve the patient experience, advance clinical quality, and increase access to care, while addressing rising health care costs,” says Tammie C. Epps, media relations manager for Palmetto Health. 

Epps also notes, “By Greenville Health System and Palmetto Health coming together to create S.C. Health Company, we ensure our state continues to be led by a local, not-for-profit health company—a South Carolina health company taking care of South Carolinians.”

Right now, mergers are all the rage in the healthcare world. South Carolinians have to look no further than the recent merger of Cincinnati, Ohio-based Mercy Health with Bon Secours Health System, a company with hospitals in Greenville and Charleston and cities in five other states. 

Combined, the two private Catholic hospital systems will have nearly 60,000 employees, 43 hospitals, and 1,000 care sites and serve an estimated 10 million patients a year—numbers that all dwarf S.C. Health.

But even if Mercy and Bon Secours join forces, their size is nothing compared to the giants in the industry. 

Presently, Nashville-based HCA Healthcare has 178 hospitals, 120 outpatient surgery centers, and 46,745 beds, and it’s looking to add six more when it buys Asheville’s Mission Health. 

Meanwhile, the next biggest system, Franklin, Tenn.-based Community Health System, has 126 hospitals in 20 states. 

However, HCA would have lost its position as the nation’s largest health system if the proposed merger of Ascension and Providence St. Joseph Health had gone forward. Together, an Ascension and Providence partnership would have yielded 191 hospitals in 27 states, but those plans have been put in the trash bin.

With that in mind, the scale of S.C. Health seems small by comparison. Some even say that, despite the change, S.C. Health remains a local company committed to its communities. And this commitment to its Palmetto State customers remains a core mission of S.C. Health, just as it is for GHS.   

“For our patients, locally led, not-for-profit healthcare means we continually reinvest in our facilities, equipment, and the services we provide, so patients continue to have access to the high-quality care they need and deserve,” says Sandy Dees, senior media relations coordinator for the Greenville Health System. “GHS reinvests 100 percent of its profits back into new and improved services for patients, facilities to make care more accessible, and additional team members to provide vitally needed health services.”

Dees also notes, “GHS is proud to give back to its communities, including providing healthcare for thousands of uninsured, indigent, and Medicaid patients each year as part of our community mission. Last year alone, the not-for-profit GHS—which receives no tax dollars—provided $418 million in community benefit. That includes GHS absorbing $98.7 million in charity care, $96 million in bad debt, and $177.4 million of unpaid costs when Medicare reimbursement fell short of the actual cost of care.”

Be that as it may, the one question that the public is probably most concerned with is: will this partnership bring about lower costs? 

“Our partnership gives us a unique opportunity to make positive changes over time,” Epps says. “We will work together to reach more patients, make South Carolina healthier, attract new team members, spur economic development, offer new and broader services to our patients, and make healthcare better and more affordable.”

Epps adds, “S.C. Health Company has the scale and scope to invest up to $1 billion additional dollars over the next five years in the Midlands and Upstate, through debt financing. This investment will be used for health programs, technology, facilities, and team members, which will improve the health of our patients and communities.”

At least one study supports the notion that such partnerships and mergers increase efficiency and therefore lower costs. According to a 2017 study conducted by Charles River Associates paid for by the American Hospital Association, mergers lowered hospital operating costs by 2.5 percent.

That said, there are some who worry about the ability of mergers to truly bring down costs. 

Former Federal Trade Commission Chairwoman Edith Ramirez addressed the increase in mergers at a 2016 Antitrust in Healthcare Conference. 

“I remain very concerned about the rapid rate of consolidation among healthcare providers,” Ramirez says. “In 2015, the number of hospital mergers increased 18 percent over the prior year and were 70 percent higher than in 2010. And the rate may even be accelerating.”

Still, Ramirez noted that mergers only seemed to be a problem when it curtailed competition within a market. 

“Most provider mergers are not anti-competitive, but the few that are could cause significant competitive harm,” she said, before bringing up a 2015 FTC study. “While many factors influence provider prices, the study shows that hospitals that face fewer competitors have substantially higher prices, controlling for quality and other differences. 

“According to the study, hospital prices in monopoly markets are more than 15 percent higher than those in areas with four or more competitors. It also found that, where hospitals face only one competitor, prices are over 6 percent higher; where they face two, almost 5 percent higher.” 

The Upstate is currently home to several major hospital systems, including GHS, Bon Secours, Spartanburg Regional Healthcare System, Mary Black Health System, and AnMed Health, in addition to private practices, so-called doc-in-the-boxes, and an increasing number of non-traditional operations, like CVS pharmacies, providing some healthcare services. 

Recently, CVS Health Corp. announced it was hoping to merge with health insurer Aetna Inc., leading analysts to believe the pharmacy chain plans to expand its Minute Clinic services. Amazon, JPMorgan Chase, and Berkshire Hathaway have also formed a partnership that may enter the healthcare field. 

One industry watchdog remains skeptical about the claims that mergers will bring about lower costs.

“Those are promises that have been made a whole lot in the past, and very few times have they born out to be true,” says Duke University business professor Barak Richman, an expert on healthcare consolidation. He notes that hospital systems are extremely complicated operations where it’s difficult to predict costs. 

“If you don’t know what your costs and prices are, it’s very hard to say you’re going to create efficiencies,” Richman says. “Even theoretically, it’s very hard to imagine that the people who lead these kinds of mergers have a handle over them to create the kind of efficiencies they need.”

Despite this, Richman hopes that these mergers can drive down costs. “Maybe this is different, but history has provided a very consistent lesson,” he says, before adding that even new initiatives from CVS and Amazon could contribute to lower costs. “It’s possible they can provide a meaningful alternative.”