Hospital M&A: Don’t Let Patient Safety Indicators (PSIs) Slip During Integration

As health systems race to expand and cut costs, M&A deals have averaged 250+ per year over the past five years. Yet while financial and operational synergies dominate the headlines, a critical lens is often missing: how consolidation affects CMS Patient Safety Indicators (PSIs)—and, ultimately, reimbursement, outcomes, and public trust.

CMS tracks preventable adverse events—falls, pressure ulcers, sepsis, postoperative complications—via PSIs. These measures (notably the PSI 90 composite) are publicly reported and tied to payment under the Hospital-Acquired Condition Reduction Program (HACRP). Bottom-quartile performance can cut up to 1% of total Medicare inpatient reimbursements—turning post-merger safety dips into real revenue losses.

Why PSIs Matter—Especially During M&A

• PSIs flag preventable harm (e.g., sepsis, in-hospital falls, pressure ulcers, postop respiratory failure).
• PSI 90 is visible on CMS Care Compare and directly impacts HACRP penalties.
• Even modest PSI upticks can trigger reputational damage and payment reductions.

The Merger Surge & the Safety Slump

• Experience dips: After >200 mergers, acquired hospitals’ patient experience fell from the 50th to 41st percentile (JAMA, 2020).
• Workflow disruption: New demographics, teams, and tech introduce variability and safety risk (Ariadne Labs).
• Penalty exposure: Small increases in PSI events can push hospitals into HACRP penalty territory.

Hidden Post-Merger Risks Affecting PSIs

• Disparate EHRs/IT: Incompatible systems cause documentation gaps, duplicate entries, and coding errors.
• Turnover & burnout: 12–18% higher clinical turnover erodes know-how and slows onboarding.
• Fragmented workflows: Inconsistent protocols raise events like sepsis (PSI 13) and pneumothorax (PSI 6).
• Culture shock: Demoralization reduces error reporting and adoption of standardized practices.

It Can Work: The Upside with the Right Plan

With strong clinical governance and transparent integration, quality can improve—mortality reductions up to 27% within three years have been reported (Health Affairs, 2022).

What Forward-Looking Hospitals Should Do

1. Audit LOS & PSI outliers: Identify services/procedures driving variation or PSI events.
2. Unify EHR & documentation: Standardize coding, PSI definitions, order sets, and reporting.
3. Pilot QI where risk is highest: Start with high-volume surgical units; expand system-wide.
4. Invest in governance & training: Engage physicians in integration design; hard-wire safety bundles.
5. Track PSI 90 in real time: Dashboards that compare pre-/post-merger baselines and flag early signals.

Key Stats at a Glance

• Patient experience drops by ~9 percentile points post-merger (JAMA).
• Bottom-quartile PSI 90 hospitals face 1% Medicare payment penalties (CMS HACRP).
• Mortality reductions up to 27% achievable with well-executed integration (Health Affairs).
• 100+ U.S. hospital M&A deals annually since 2014 (market analyses).

Scale only wins when safety scales with it. In value-based care, PSIs are the signal— not the noise—of merger success.

Planning an acquisition? MGA helps integrate operations without sacrificing safety. Contact hello@modalityglobal.com.

Sources: CMS.gov; JAMA Network; Health Affairs; Ariadne Labs; Leapfrog Group; WTW Global Medical Trends Survey (2025).