FACT CHECK: Provider Consolidation Driving Up Costs
Posted by Campaign on February 24, 2010 at 8:54 AM
FACT CHECK: Provider Consolidation Driving Up Costs
· Massachusetts Attorney General Martha Coakley recently issued a report on hospital consolidation in the state. According to a recent Boston Globe story, the report “points to the market clout of the best-paid providers as a main driver of the state’s spiraling health care costs” and “found no evidence that the higher pay was a reward for better quality work or for treating sicker patients”.
· A report from the Robert Wood Johnson Foundation found that hospital consolidation has contributed to rising health care costs. The report stated: “Research suggests that hospital consolidation in the 1990s raised inpatient prices by at least five percent and likely significantly more. Prices increase 40 percent or more when merging hospitals are closely located.” The report also found that higher hospital prices do not translate to higher quality of care: “[A] narrow balance of the evidence and the evidence from the best studies indicates that hospital consolidation more likely decreases quality than increases it.”
· According to a brief from the National Institute for Health Care Management: “With only a few exceptions, results consistently demonstrate that hospital consolidations result in higher prices for hospital services. The magnitude of price increase varies by methodology and by the characteristics of the markets under study, ranging from low-end estimates of 5 percent price hikes to increases of more than 50 percent.”
· The Federal Trade Commission and the Department of Justice held extensive health care hearings in 2002 and 2003, and in their subsequent report noted the correlation between hospital concentration and high hospital prices: “Most studies of the relationship between competition and hospital prices have found that high hospital concentration is associated with increased prices, regardless of whether the hospitals are for-profit or nonprofit.”
· Recent reports show how much hospital consolidation has increased in recent years, indicating that:
o The vast majority (88 percent) of U.S. Metropolitan Areas have highly concentrated hospital markets.
o Hospitals markets have increased their concentration by 47 percent over 13 years.
