A successful NHS merger is the exception, not the rule

There are few medicines the NHS enjoys more than a merger.

The Department of Health and commissioners allocated close to £2bn to just 12 of 20 foundation trust and NHS trust mergers in the past five years.

This compares to £200m so far set aside to implement the new care models outlined in the NHS five year forward view. NHS leaders predict a steady flow of mergers in the near future – despite the lack of evidence that they generally lead to more sustainable organisations or improve the quality of care.

Our report on recent NHS mergers makes for sober reading.

We paint a picture of a highly centralised system where providers pursue mergers at the instigation of national bodies, almost always in pursuit of FT status or in response to financial failure.

‘The DH and commissioners allocated £2bn to just 12 of 20 FT and NHS trust mergers’

Almost all were “horizontal mergers” between neighbouring hospitals that appear to perpetuate traditional service models, rather than creating the basis for the fundamentally different systems of care we need.

Hard pressed NHS leaders appear to be betting the farm on mergers for severely challenged hospitals, typically after a range of other strategies - changing the management team, sending in consultants and so on - have failed.

• Reconfiguration: Play the long game for successful mergers
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Critical mass

Yet we found significant weaknesses in how NHS organisations weigh options and articulate the rationale for mergers, at least in their published documents. We were unable to identify a clear rationale for many of the mergers we looked at.

Providers’ business cases often put forward generic arguments that their mergers will make it easier to recruit staff, reduce overheads or share best practice, although there is little evidence that these benefits actually materialise. 

In other cases, they put forward benefits that could, and in some cases were, already being achieved without the need for a merger.

Underlying these arguments, there appears to be a deeply held faith in the benefits of scale or “critical mass” – not strongly supported by the evidence – and a lack of awareness of the disadvantages of creating larger and more complex organisations.

‘There appears to be a deeply held faith in the benefits of scale’

Some of the mergers we looked at brought together specialist centres, full service district general hospitals, the manufacturing plants for elective operations and community teams. We might question whether these mergers will create organisations with a clear sense of purpose, a strong corporate culture or a coherent business model.

Our review also highlights the length of time, costs and risks involved in pursuing mergers. In some cases, providers spent 4-5 years identifying a merger partner, developing the business case and gaining approval.

On average, the DH and commissioners allocated around £160m per merger – although almost all the money goes towards recapitalising the organisation, funding future deficits and capital investment, with just a small proportion earmarked for securing merger synergies.

This begs the question whether providers pursue mergers primarily as a way of accessing funding, while raising further doubts about the benefits of the merger.

Merger failures

All of this is despite a growing body of evidence that hospital mergers typically fail to deliver the intended benefits.

Research by the University of Bristol on 102 acute hospital mergers found that productivity remained unchanged, waiting times rose and the size of merging trusts’ financial deficits increased.

This is consistent with much of the research on mergers in other health systems and sectors. Across other industries, study after study puts the failure rate of mergers and acquisitions between 70 per cent and 90 per cent.

Of course, there have been successful mergers in the NHS and other health systems. We imagine that some of the mergers studied in our report may be successful too.

But policy makers and system leaders need to recognise that this is the exception rather than the rule. In some cases, such as South London, the mergers devised to address the consequences of previous failed mergers are now, themselves, running into trouble.

‘“Whole system intervention’ has greater promise than pummelling neighbouring hospitals with conglomerations’

It is legitimate to ask what might have been achieved if the hours of leadership time and hundreds of millions in public money had been used to restructure the local care system without the distraction of a merger.

While mergers will continue to play a role in the NHS, we argue that the national bodies should rule them out as a route for NHS trusts to gain FT status or as a response to failure, in the absence of evidence that they typically help to create more sustainable organisations.

Where reconfiguration is needed, the NHS should focus leadership time and funds on developing the service model, setting out the evidence base, engaging with stakeholders and implementing the change, rather than allowing time and money to be consumed by mergers.

An alternative to merger, which we will outline in a forthcoming paper is for groups of NHS providers, local authority services and other partners to work together to develop place based systems of care, cutting across existing organisational and service boundaries to meet the needs of a defined local population.

Such an approach would build on the principles of “whole system intervention” identified in the national bodies’ new “success regime”. In our view, these emerging collaborations hold much greater promise than pummelling neighbouring hospitals into ever larger conglomerations.

Ben Collins is a project director at the King’s Fund