Updated Aug 21, 2018 - Economy

Hospital mergers don't really lower some costs

A surgeon preps for a procedure with supplies.

A new study says hospital supply costs don't decrease a lot after mergers. Photo: BSIP/UIG via Getty Images

New research shows hospitals aren't saving a lot of money on routine expenses — such as surgical staples, stents and implants — after they merge with or acquire other hospitals.

Why it matters: Lowering costs is one of the primary justifications hospitals give for consolidating, but this developing research indicates that argument doesn't carry a lot of weight.

By the numbers: Hospitals that were acquired in the past several years saved an average of 1.5% annually on supplies, devices and other equipment, according to the study. That equates to just a fraction of the savings that hospitals touted as a benefit of their mergers.

  • Hospitals have argued bigger systems will have more negotiating power for the things they have to buy, which will lower costs overall.
  • Most of the savings the study identified came from reduced prices for items like like spine and joint devices. But costs were not significantly lower across the board.
  • "We view this potential 'synergies on input cost' argument much more skeptically now than going into this study," said Matt Grennan, a health care management professor at the University of Pennsylvania and one of the authors of the study.
  • The American Hospital Association responded in a statement that it was reviewing the paper but argued that "regulatory barriers, including the anti-kickback law, limit the ability of hospitals to work with physicians to bring down purchasing costs further."
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