Apr 24, 2024 - Health

Unchecked hospital mergers increased health costs, study finds

Animated GIF of two hospitals merging, with a dollar sign appearing in between them

Illustration: Sarah Grillo/Axios

Federal regulators vastly under-enforced antitrust laws in the hospital sector in the last two decades, a new study finds.

Why it matters: Unchecked mergers during a period of rapid consolidation represent a significant factor in rising health costs, according to the study in the American Economic Review.

What they found: Of the 1,164 mergers of acute-care hospitals between 2002 and 2020, the Federal Trade Commission only took enforcement action against 13 of them (1%), according to the study.

  • However, the FTC could have flagged 238 (20%), based on the agency's own tools for screening mergers that could reduce competition and raise prices.
  • Health care prices increased at least 5% as a result of hospital mergers between 2010 and 2015 that the FTC could have — but did not — flag as anticompetitive.

Many deals crossing the FTC's desk are "not rock-the-earth deals, but they're deals that do raise prices," said Yale economist and study co-author Zack Cooper. "We're getting death by 1,000 cuts in communities from these sorts of mergers."

  • Mergers in rural and lower-income regions increased hospital prices more than those in other parts of the country, furthering health inequities.

The big picture: Researchers pointed to underfunding of the FTC as a likely factor in lax enforcement — an assessment the agency agreed with.

  • Between 2010 and 2015, the FTC's average annual budget for antitrust enforcement was $136 million, according to the report.
  • Meanwhile, hospital mergers during that period raised health spending on privately insured people by $204 million on average in the year following those deals.
  • "We've got an FTC that's really good at what they do but has a ton on their plate, and we sort of starved them of resources," Cooper said.

Yes, but: The Biden administration has prioritized increasing competition in health care, and the FTC approved new merger guidelines last year that could make it easier to challenge health care deals.

  • "The issue is resources. If the FTC had more staff, it would do more enforcement," FTC spokesperson Victoria Graham said in an email.
  • "Yet, even with limited resources, in the past several years, which this study fails to take into account, the FTC has successfully challenged several hospital mergers," she added.
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