The Effect of Hospital Consolidation on Prices and Quality

An interesting report from the Robert Wood Johnson Foundation summarizes the literature describing the effect of hospital concentration in a market on prices and quality.  The general consensus from the literature is the following:

  • Increases in hospital market concentration lead to increases in the price of hospital care
  • Hospital mergers in concentrated markets generally lead to significant price increases
  • At least for some procedures, hospital concentration reduces quality
  • Hospital competition improves quality under an administered pricing system (e.g., National Health System in England)
  • Competition improves quality where prices are market determined, although the evidence is mixed

A summary of these findings is available here.

Close to my home, a study by Tenn (2011) found that the San Francisco Bay Area merger of Sutter and Summit Healthcare systems lead to price increases (28% to 44%) that were among the largest of any comparable hospital in California.  The authors concluded that the transaction may have been anti-competitive.

The RWJF study also concludes what I have been saying over the past years, the Accountable Care Organizations (ACO) promoted by the Affordable Care Act (ACA) may not improve quality and are likely to increase the price of healthcare.




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