Hospitals, medical groups, and many businesses have argued that they need to merge to compete in the market. The argument traditionally is that they are merging to decrease costs. However, a recent study from Glenn Melnick in the Journal of Health Care Organization, Provision, and Financing published in June 2016 concludes that hospital mergers significantly raise prices likely be market strength.
In California, the study finds that the average patient admission costs $4,000 more at Sutter and Dignity hospitals than at other California medical centers.
These large hospital groups are using their assets to further purchase physician medical groups which further raises prices.
From the article:
The “surge in hospital consolidation is fueling formation of ever larger multi-hospital systems throughout the United States. This article examines hospital prices in California over time with a focus on hospitals in the largest multi-hospital systems. Our data show that hospital prices in California grew substantially (+76% per hospital admission) across all hospitals and all services between 2004 and 2013 and that prices at hospitals that are members of the largest, multi-hospital systems grew substantially more (113%) than prices paid to all other California hospitals (70%). Prices were similar in both groups at the start of the period (approximately $9200 per admission). By the end of the period, prices at hospitals in the largest systems exceeded prices at other California hospitals by almost $4000 per patient admission.”
The question is what should be done about healthcare mergers? When should these mergers be considered monopolies or oligopolies? Should the States and Feds limit these mergers? Should there be rate setting boards that determine ?
One thing that should be noted is that Mr. Melnick as “the author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article. Funding The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: This study was supported by USC Center for Health Financing, Policy, and Management.” But his credentials declare that he is the Blue Cross of California Chair in Health Care Finance. This is an interesting finding as many of his articles seem to frequently looks at ways to decrease the costs of insurance companies.