Sep 5, 2019

A reality check on hospital mergers

Illustration: Sarah Grillo/Axios

A new report funded by the American Hospital Association claims hospital mergers result in better care and savings for patients. But every other independent study shows the exact opposite — that hospital mergers lead to less competition and higher prices.

Why it matters: Hospitals represent the largest chunk of U.S. health care spending. And hospitals are acquiring more market power and commanding higher prices — bills that every American pays for in some part.

Driving the news: AHA CEO Rick Pollack told journalists Wednesday that hospital mergers "create efficiencies that unleash savings," and that his organization's report proved it.

Yes, but: The report is not close to being an independent assessment.

  • A large portion relies on non-random interviews of hospital executives who have been involved with acquisitions.
  • The data analysis focuses on costs, not prices, which skews the conclusions.
  • These analysts are paid consultants, and the report was not peer-reviewed.

Reality check: Academic researchers countered the AHA's report by laying out their own independent work.

  • One of the most comprehensive studies, which was published last year and is based on commercial insurance claims data, found that hospitals with little competition command higher prices and more favorable contractual terms, said Zack Cooper, a Yale health economist and lead author of the study.
  • Hospital systems in different metro areas also raise prices when they combine, said Leemore Dafny, a Harvard health economist.
  • Merging systems don't really save money on routine items like supplies and devices, said Stuart Craig, a research student at the University of Pennsylvania.
  • Large hospital systems beget even larger systems, which operate more like publicly traded companies than tax-exempt charities.

Not all hospital mergers are inherently bad. But "consolidation…is not the same thing as integration," said Martin Gaynor, a health economist at Carnegie Mellon University.

The bottom line: "This sort of consolidation is raising prices and driving up health care costs," Cooper said.

Go deeper

Most hospital markets are highly concentrated

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Why it matters: The more hospitals that have monopolies or oligopolies in their markets, the higher the prices are for patients, which is reflected in the premiums everyone pays.

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Illustration: Sarah Grillo/Axios

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The bottom line: Pharmaceutical firms and hospitals, in particular, are reaping some of the largest rewards even amid the sustained public furor over drug prices and surprise medical bills.

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Hospitals are getting into the housing business

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The big picture: Hospitals across the country are looking at ways to address homelessness, including building their own housing units.

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