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Hospital Mergers Raise the Price of Admission, Decrease Competition

— November 27, 2018

Hospital Mergers Raise the Price of Admission, Decrease Competition

A recent analysis revealed that hospital mergers have served to eliminate competition and raise the prices for admission.  The analysis took a look at the 25 metropolitan areas with the highest rate of hospital consolidation in the three-year span from 2010 through 2013.  Prices of hospital admission in most areas increased between 11 percent and 54 percent, according to researchers from the Nicholas C. Petris Center at the University of California, Berkeley.

President Trump issued an executive order in 2017 calling for more competition, saying his administration would focus on “limiting excessive consolidation throughout the health care system.” In response, Congress asked the Medicare advisory board to study the trend, which has steadily continued.  Ted Doolittle of Connecticut’s Office of the Healthcare Advocate sees few options available. “A lot of this is too little and too late,” he said.

There has been consolidation of major facilities across the country as of late.  Dignity Health and Catholic Health Initiatives, two large chains, are expected to become one of the nation’s largest groups by the end of 2018.  Two of Texas’ biggest systems, Baylor Scott & White Health and Memorial Hermann Health System, recently announced plans to merge.

Hospital Mergers Raise the Price of Admission, Decrease Competition
Photo by jesse orrico on Unsplash

Yale New Haven Health, one of the largest hospital groups in Connecticut, took over the city’s only competing hospital, Saint Raphael, in 2012 while expanding its reach along the coast.  The merger led to a 1,519-bed hospital with two main campuses.  Although the prices of a hospital admission in the New Haven-Milford area were already three times higher than in other parts of the state, prices soared again by 25 percent from 2012 to 2014.

“[Combining resources is] more powerful when they already have a very large market share,” said Richard Scheffler, Director of the Petris. “The impact is just enormous.”

In Parkersburg, West Virginia, St. Joseph’s merged with Camden-Clark Memorial in 2011, and then they were consumed by what is now the state’s largest health system.  “We’ve got it down to a single campus,” said Albert L. Wright Jr., the chief executive of West Virginia University Health System. “Parkersburg is not big enough to support two hospitals.”  He added that in doing so, “We’ve elevated the level of care.”

However, insurance companies are paying more for the restructuring in most cases.  In the Parkersburg-Vienna area, the overall price of a stay increased 54 percent from 2012 to 2014.  Large systems “get paid better by some of the insurers,” Mr. Wright confirmed.

Patients are also paying more out of pocket.  One third of the areas analyzed experienced increases in the cost of hospital stays of at least 25 percent from 2012 to 2014, from an estimated $12,000 on average to at least $15,000.

“These systems are empire-building, there’s no question,” said Jill Zorn, a senior policy officer for the Universal Health Care Foundation of Connecticut. “But to whose benefit?”  Many studies have outlined how hospital consolidation is increasing the overall cost of care for almost all parties involved.

Francois de Brantes, a health care executive who once worked at General Electric, said. “The puzzling part for many of us…is why anyone would allow these oligopolies to form.”


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