Do you live in an area with hospital competition?

Likely not.  At least according to some research by William Vogt.  In an NIHCM Issue Brief, Dr. Vogt states:

The inpatient hospital market in the United States was transformed by a wave of hospital consolidation during the 1990s, which witnessed more than 900 mergers and acquisitions. Many cities came to be dominated by two or three large hospital systems, and by 2003 almost 90 percent of Americans in metropolitan areas faced a “highly concentrated” hospital market, according to U.S. antitrust standards.

Does hospital competition matter? Likely yes. Less competition means higher prices for consumers. Vogt presents some time series data to support the claim:

…hospital prices to private payers in California fell from $10,800 per discharge in
1992 to $8,500 in 1999 – a more than 20 percent decline during this period of tightly managed care. After that, as hospitals consolidated and the impact of managed care waned, prices to private payers increased rapidly, nearly doubling to $15,600 per discharge by 2006. These price increases were highest in markets
with a small number of dominant hospitals.

There is some evidence that hospitals have modest economies of scale from merging; however these cost savings are not passed on to consumers. Further, “In the Medicare market, hospital consolidation
seems to lead to lower quality, at least for easily measured quality indicators.”

On the one hand, agencies such as the FTC and DOJ may push for more competitions. On the other hand, CMS and HHS are pushing for more consolidation, as they promote the use of accountable care organizations.

Not only can a lack of hospital competition affect prices, but so can a lack of insurer competition.  Dr. Austin Frakt reports in another NIHCM brief that:

Most prior work has focused on hospital consolidation and concluded that greater hospital market concentration raises hospital prices, sometimes by very significant amounts. Insurer consolidation can also lead to higher premiums, but available evidence points to a very modest impact. One recent study showed, for example, that the significant increase in insurer concentration that took place between 1998 and 2006 explained only 2 percent of the total increase in premiums over that period.

Are more mergers on the horizon? Maybe, maybe not. Dr. David Dranove writes that in recent years attorney generals have started to worry about market concentration.

Currently, Attorneys General in Massachusetts and California, respectively, are investigating concerns that Partners Healthcare and Sutter Health dominate their local markets and insurers feel unable to resist their demands for greater reimbursements.

Further, in Idaho, the FTC blocked a merger between St. Luke’s Healthcare and Saltzer Medical Group.

The future market concentration of the healthcare industry is thus yet to be determined.

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