Bloomberg Opinion: “Bigger Hospitals Mean Higher Prices, Not Better Care”

Evidence continues to show that when it comes to provider consolidation, the rhetoric is about efficiency, but the reality is higher prices for consumers.

The latest research shows that provider consolidation continues at a ferocious pace and that providers’ growing market power is the “elephant in the room” that is rarely mentioned. In fact, experts at the Robert Wood Johnson Foundation found in a study that the recent wave of mergers among providers increases costs for consumers with no countervailing increase in quality of care.

Now, an op-ed by two experts published by Bloomberg, “Bigger Hospitals Mean Higher Prices, Not Better Care,” says that “The disconnect between price and value has many causes, but the flurry of mergers and acquisitions in the hospital industry is making it worse. Hospitals command higher prices when they corner market share. They gain even more leverage when they gobble up large physician practices.”

Writing about the current environment, the authors say, “Hospitals are busily merging with other hospitals and buying up groups of doctors… They argue that they have to get bigger to cut waste. What’s the evidence that bigger hospitals offer better value? Not a lot.”

In fact, the article notes, studies show that increasing provider consolidation leads to higher prices for consumers with no increase in quality of care: “Larger hospitals are also very good at raising prices. In 2010, an analysis for the Massachusetts attorney general found no correlation between price and quality of care. A study published recently in Health Affairs offered similar results for the rest of the country: On average, higher-priced hospitals are bigger, but offer no better quality of care.”

And when hospitals buy physician groups the price increase for consumers can be steep. “Hospitals often command higher rates and tests than do specialists in their private practices. With specialists on a salary, a hospital can charge its higher rates, and the parties split the increased revenue,”

“The phenomenon of buying doctors’ practices is changing health care in ways that go deeper than raising prices. Power is shifting from physicians and other caregivers, whose duty…is to the needs of patients, toward administrators and corporations, whose loyalty lies with the institution or shareholders,” the authors write.

To learn more about how provider consolidation is leading to higher prices for consumers, read our AHIP Coverage blog posts.

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