Prices are Higher under Monopoly

What makes this worrisome is that ObamaCare is encouraging consolidation.

Unit prices for hospitals and doctors are rising also, driving spending up, and evidence is mounting that the major contributor is ongoing provider consolidation. By 2006, over 75 percent of U.S. metropolitan statistical areas (MSAs) had experienced enough hospital merger activity to be considered “highly consolidated.” Nationwide, payments to hospitals on behalf of the privately insured are an estimated 3 percent higher than they would be absent hospital consolidation. In some specific cases, prices have gone up as much as 50 percent post consolidation. For example, when two competing Northern California hospitals, Summit and Alta Bates, merged, prices increased between 28 and 44 percent.

More on provider consolidation at the Health Affairs Blog.

Comments (6)

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  1. Cindy says:

    That’s interesting (and a little scary).

    I’m curious, though — what mechanisms of Obamacare most directly encourage consolidation?

  2. Devon Herrick says:

    There is little doubt that the primary reason behind hospital consolidation is to gain leverage against health insurers. There may be economics of scale, but the savings accrues to health care systems in the form of higher profits — not to health plans in the form of lower premiums or lower provider payments.

  3. Cindy says:

    Wow — that’s really eye opening. I’m sure most people have no idea!

  4. Claire says:

    Have we considered whether the reason why these hospitals have merged is perhaps because they can’t afford to remain open and functioning on their own? Maybe the only way for them to stay working and offering services is through consolidation with more stable institutions? Rising prices hurt us all, but if we try and find a good side to this situation, perhaps is the fact that more hospitals remain open and working, instead of closing down. That’s just my opinion.

  5. Baker says:

    As these hospitals merge, i’d expect to see smaller, specialized facilities pop up. Especially if insurance companies see a better deal from them.