Health Reform Industrial Organization Public Policy Supply of Medical Services

Did the ACA cause industry consolidation?

The Affordable Care Act (ACA)–among other things–mandated a number of reforms to the Medicare reimbursement system.  For instance, the ACA created Accountable Care Organizations (ACOs) and bundled payment initiatives were initiatives.  If Medicare started paying providers more based on quality and total cost of care across all provider settings, one would hypothesize that industry consolidation would accelerate.

An article by Neprash, Chernew and McWilliams, (2017) however, argues that the data does not support this conclusion.  Although industry consolidation has increased, it likely is not due to the ACA.  They write:

Drawing on data from a number of sources from 2008 onward, we examined the relationship between Medicares accountable care organization (ACO) programs and provider consolidation. We found that consolidation was under way in the period 200810, before the Affordable Care Act (ACA) established the ACO programs. While the number of hospital mergers and the size of specialty-oriented physician groups increased after the ACA was passed, we found minimal evidence that consolidation was associated with ACO penetration at the market level or with physiciansparticipation in ACOs within markets. We conclude that payment reform has been associated with little acceleration in consolidation in addition to trends already under way, but there is evidence of potential defensive consolidation in response to new payment models.

Despite the observation that the ACA may not have caused provider consolidation, a trend towards more provider market power and less competition is worrying for consumers and should not be ignored.


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