Mergers in Higher Education

Recently, Clarkson University and Union Graduate College in New York State merged. According to a Clarkson news release, Anthony Collins, Clarkson’s president, said that the merger would “bring together two strong, stable and financially viable institutions, and . . . leverage their complementary curricula and significant resources.”

Many higher education institutions have joint programs, but such collaborations typically don’t affect each institution’s independence or identity. However, technological developments related to educational delivery, coupled with an anticipated flattening of revenue from tuition, could compel colleges and universities to pursue transformational arrangements like mergers.

Might the Clarkson-Union affiliation signal a potentially broad and rapidly occurring trend in higher education? Absolutely! And the strongest clues come from another field—health care.

Striving for Economies of Scale

A few decades earlier, the same forces—technological advances and economic pressures— came together and set off a remapping of the health-care landscape. In 1975, the United States had approximately 7,200 hospitals. Today, the number is down to about 5,800. And during this period, the number of hospital beds plummeted by an astonishing 30 percent. These declines occurred while the population grew by about 100 million, and the fastest growing segment was the elderly, the group most likely to need health care.

Many factors contributed to the reduction of hospitals and beds, but two are especially noteworthy. First, technological developments drastically changed how and where patients receive care. Advances such as minimally invasive surgical procedures spurred a huge shift of patients from hospitals to same-day surgery facilities. And the advent of electronic medical records made it more feasible for health-care providers to link together. Once formed, health-care systems have strong financial incentives to keep patients from going elsewhere for care.

Second, policy initiatives aligned with market forces in seeking to contain runaway health-care costs, which ballooned from $356 per person per year in 1970 to more than $9,000 today. Government-imposed efforts included the introduction in 1983 of fixed fees for about five hundred Medicare diagnoses. Similarly, the ubiquitous, largely market-driven expansion of managed care in the 1990s limited how much health-care providers could charge their patients. In this new era of preset payments, costs for unfilled beds could no longer be transferred to payers and, consequently, could not be recouped. As a result, underutilized hospitals and beds fell out of the system.

The pressure for health-care organizations to find economies of scale mounted, triggering a period of aggressive partnership formation. According to the Health Care Acquisition Report and Healthcare Finance News, between 1998 and 2014, over 2,600 hospitals merged. Today, the majority of US hospitals belong to health-care systems.

Adapting to Emerging Technologies

Today, similar winds of change are blowing fiercely in the direction of higher education. Just as new technologies prompted patient migration from hospitals to more convenient care-giving venues, emerging technologies in education are redefining how and where students engage with learning institutions. Technological advances in this case are driving a migration toward “distance-based” courses. According to the Babson Survey Research Group, in 2002, 1.6 million students took an online course; a decade later, the number soared to 6.7 million. Inside Higher Ed reports that during this period, online enrollment expanded from under 10 percent of total enrollment to almost 35 percent.

This is not to suggest that online models will or should replace face-to-face learning. However, online methods are becoming increasingly effective and create learning opportunities for many, including working adults who would otherwise have difficulty attending college. This trend is especially important for graduate education, since many fields now require an advanced degree for professional growth.

In addition, much as electronic medical records facilitate patient movement within health-care systems, emerging technologies in higher education enable students to select courses from an expansive catalog that spans multiple institutions without ever leaving home. The State University of New York, the system for which I work, recently implemented Open SUNY, a program that gives students access to online courses from all sixty-four campuses.

Has Tuition Peaked?

The tuition picture is unsettling. The US Department of Labor reports that from 2003 to 2013, tuition climbed by almost 80 percent, practically double the inflation rate of health care, nearly four times the rate of growth in housing costs, and about three times the inflation rate in the Consumer Price Index. Tuition loan debt has risen to $1.2 trillion. To put this number in perspective, approximately 70 percent of graduates in 2013 left college with an average debt of about $30,000, according to the Institute for College Access and Success.

If tuition hikes become intolerable, as occurred with rising health-care costs, colleges and universities will inevitably strive to economize. Ironically, this would reverse the recent trend of expanding administrative structures which, as Paul Campos observed in the New York Times, accounted in part for the rise of tuition fees. In the future, consolidation of administrative functions such as marketing, human resources, and financial management could prove impossible to resist if colleges and universities cannot continue to pass escalating costs on to students.

Learning from Health Care

Health-care organizations responded to the pressure to tighten their belts by uniting under common management umbrellas or in formal networks. As higher education systems form, redundancy in academic programs should give way to more complementary curricular offerings. Just as health-care systems endeavor to serve a full range of each patient’s needs, higher education networks are likely to organize in ways that keep students by offering a comprehensive menu of degree programs, courses, career-development support, and other educational services.

Differences between the two fields—health care and higher education—render analogies imperfect, and we may be inclined to shrug them aside as an apples-and-oranges comparison. But the era into which higher education is heading looks starkly like the one health care entered years ago. Brushing off the comparison too quickly could prove short-sighted. And the stakes are high.

After all, if, as predicted, we move from an environment of independent to interdependent higher education institutions, profound implications await. The experience of health care should generate important questions: How can the leverage of a large system be employed for public betterment, and not to manipulate prices? How can a college or university preserve some measure of distinctiveness while integrating into a network? How can a higher education institution maintain strong academic standards as well as a stable, high-quality, intellectually energized, professionally enriched, and well-respected faculty if the system exerts much pressure to achieve volume-driven goals? How can a local board of trustees and administration—along with reconfigured decision-making structures—remain sensitive to community needs as systemwide goals and strategies are developed remotely?

Mindful of Mission

The conditions conducive to system formation in higher education are ripening. Will all institutions survive in a restructured environment? Much as occurred in health care—and for similar reasons—probably not. But as the future of higher education unfolds, we should all hope that colleges and universities will be guided unwaveringly by the mandate to serve society’s advancement, encourage lifelong learning, and motivate students to contribute to the common good.

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. His e-mail address is [email protected].