Study: Hospitals More Concentrated Than Insurers
This is from the latest issue of Health Affairs:
First, we found that 64 percent of hospitals operate in markets where health plans are not very concentrated, and only 7 percent are in markets that are dominated by a few health plans. Second, we found that in most markets, hospital market concentration exceeds health plan concentration. Third, our study confirmed earlier studies showing that greater hospital market concentration leads to higher hospital prices…Our findings also suggest that consumers would benefit from policies that maintained competition in hospital markets or that would restore competition to hospital markets that are uncompetitive.
The trend in recent years among hospitals has been acquisitions, market consolidation and individual hospitals forming networks of hospital systems. The proponents of the consolidations probably tout economies of scale, boosted efficiency, greater purchasing power and fewer redundant administrative functions. But, the evidence suggests merging into large hospital systems (i.e. creating oligopolies) allows hospitals more bargaining power against insurers. If 20 regional hospitals merge into three dominant hospital systems, it is easier for them to informally collude. It also makes it almost impossible for an insurer to refuse to reign agreements with one major system when it represents one-third of the market.
Holy Smokes, Batman! This changed my entire mind on hospital competition.
Thanks for the repost of this riveting paragraph.
-Danna
Soon enough, all the hospitals will work for the government. So will the insurance companies.
It makes no sense to me that the prices rise within areas of higher hospital concentration. Is there no hope for cost transparency and competition?
This not surprising news. Certificate of Need programs have, for a long time, prevented competition to exist in the hospital industry, especially in rural areas where hospitals can dictate what insurers have to pay. I found a study by the Department of Justice dated 2004 no less that expressed the need to promote competition in health care!! I guess they weren’t as “progressive” back then.