Merger Mania in Higher Ed?

BY BARRY EISENBERG

Guest blogger Barry Eisenberg is associate professor in the State University of New York Empire State College’s School for Graduate Studies and a consultant to health-care organizations on strategic planning and governance. He was a hospital executive for twenty years and is coauthor of Mastering Leadership: A Vital Resource for Healthcare Organizations.

When I was about ten years old, I recall passing a bank that had closed.  I asked my mother 11awhy, and she explained that there may have been too many banks for the number of people in the community.  I never imagined a bank could close.  It felt astonishing.

In the early 1980s, when I first started to work in hospital administration, there were over 7,000 hospitals in the country.   At the time, the prospect of a hospital shutting down seemed remote, and the thought of large numbers of hospitals closing was unimaginable.  Well, today there are fewer than 6,000 hospitals in the United States, a drop of almost 20% from almost 40 years ago!  In addition to the culling of hospitals, the majority of those remaining belong to hospital systems.

My article in the November–December Academe, “Mergers in Higher Education,” highlights the reasons for the aggressive merger-consolidation in the healthcare industry and presents the argument that the very factors that have fueled the trend are steamrolling toward higher education [please note that this member-only article requires an AAUP login in order to access the full text].  These factors – most notably, (1) the rapid deployment of technologies that facilitate the consumer’s movement from traditional places of service (hospital or college classroom to, respectively, outpatient center and distance learning environment) and (2) the mounting debt amassed by consumers – are very likely to stimulate higher education institutions to embark on the path hospitals set on some decades ago.

The merger-consolidation signs are appearing with greater frequency.  Just recently, The University System of Georgia recently consolidated from eight to four institutions.  The Vermont State College system is combining some of its regional colleges.  Thomas Jefferson University and Philadelphia University are scheduled to merge in the coming months.  There are examples of such activity all over the country.  And it shouldn’t come as a surprise.  According to a recent Parthenon EY Education report, 1968-1990 was a period of Growth in higher education, due largely to increased federal spending and the baby boomers coming of age; 1990-2010 was a period of Technology as new forms of information management were influencing virtually all careers and all industries; and 2010-current is the period of Collaboration, necessary because of reduced numbers of high school graduates and an inability or unwillingness on the part of consumers to continue paying higher and higher rates of tuition.

At some point, I believe mergers will start occurring quickly.  Getting the most advantageous deal compels institutions to act.  At some point, a critical mass will replace the seemingly random, here-and-there, merger or acquisition.

When done thoughtfully and with the student at the center of decision-making, a higher education system can provide a more comprehensive range of educational offerings and leverage economy of scale principles to achieve sound financial positioning.

But, as I caution in my article, it doesn’t always work this way.  Systems can produce bloated administrative structures and wipe out the financial benefits of consolidation.  Large systems can strip competitiveness from the environment, at once controlling prices (tuition) while giving less attention to quality.  And as decision-making becomes increasingly centralized, can each college in the system remain sensitive to the communities it serves?  How can each institution in a system retain some measure of identity distinctiveness which is so crucial to maintaining a committed and good quality faculty and student base?  Will unchecked consolidation lead to the commodification of a degree?

Healthcare has been grappling with these profound issues for a long time.  As higher education moves into uncharted waters, an examination of the experience of the healthcare industry can be highly instructive.

Articles from the current and past issues of Academe are available online. AAUP members receive a subscription to the magazine, available both by mail and as a downloadable PDF, as a benefit of membership.

One thought on “Merger Mania in Higher Ed?

  1. An insightful analysis but short on the underlying etiology. There is a shift in the population attending, their needs, wants, expectations as well as the price point. The academics tend to bristle at the model of student as customer, or any other “customer” or party that pays to keep the lights on and the salaries current. Yet, since the founding of the university in 1088, the changes in the 17th, 19th and now the 21st century shows that the golden rule still holds for the larger frame. Knowledge professionals are not immune.

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