On Monday I attended a talk at AcademyHealth on the impact of market consolidation on the cost of health care. Particularly interesting was Robert (Bob) Berenson’s analysis of the effect of provider consolidation on negotiating power and health care prices. Particularly, provider have been gaining market power of late, according to recent CTS site visits. There are three main reasons for this:
- A failure of employers to agree to “narrow networks” of providers and thus be able to drive down prices
- The end of the oversupply of hospital beds
- Provider clout due to name recognition (only for the “have” hospitals, not the have nots.
Further industry consolidation has taken three main forms over the last few years:
- Multi-hospital chains are buying more hospitals,
- Hospitals are employing more physicians directly, and
- Physicians are consolidating into groups.
Physician consolidation is particularly interesting. Physicians consolidate not only to gain negotiating leverage, but a larger practice allows for physicians to start performing ancillary services such as labs and imaging.