More Hospital Consolidation, More Problems

by Alicia Caramenico

April 20, 2015

“Frenzy” – “Monopolies” – “Dangers”– “Too big to fail” – These are all words used to describe the growing trend of hospital consolidation in a recent Wall Street Journal op-ed. In the last year alone, 95 hospital mergers and acquisitions took place, according to John Hopkins’ Dr. Marty Makary.

In his op-ed, Dr. Makary shared several “serious concerns” about the rapid and accelerating pace of hospitals consolidating and buying up physician practices – higher prices from decreased competition, limited options for patients, and weakened medical insights of front-line physicians all topped the list.

Hospital mergers and physician practice acquisitions give large hospital systems stronger market power to drive up prices for patients. Dr. Makary cited a recent JAMA study that pegged 19.8 percent as the increase in price after a physician practice acquisition.

The dangers of hospital consolidation don’t stop at price. They also restrict competition, which has its own troubling effects: “When you’re the only game in town, you call the shots,” wrote Dr. Makary, who noted that the homogenization of care delivery at large provider organizations makes patient choices disappear.

Dr. Makary’s op-ed followed a new report from the National Academy of Social Insurance (NASI) examining the continued impact of consolidation on health care prices. It found that price variation is based on pricing power, not quality. For example, the report found dominant hospitals and large physician group practices can negotiate prices that are double or triple what Medicare pays for the same exact services.

The key to addressing the ridiculously high and wide variation in prices is market competition. The NASI report argues market competition is the best way to motivate providers to improve efficiency and quality.

Case in point: a study in the Antitrust Health Care Chronicle, which found more competitive hospital markets had premiums that were 8 percent lower – giving patients more than $20 in monthly savings.

Dr. Makary’s op-ed and the NASI report join mounting evidence reaching the same conclusion: Efforts to better coordinate care don’t have to – and shouldn’t – carry the same high price tag for consumers as provider consolidation.