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We have repeatedly reported on the outsized role hospitals play in the growth of health spending, particularly from rising prices paid by private health plans.  This concern is linked to the rapid consolidation among hospitals, which results in greater market power.  A new study reported in the journal Inquiry supports the view that hospital consolidation is leading to much higher prices and greater overall health spending.   (Inquiry Article)   The authors focus on California between 2004 and 2013.  California has experienced extensive mergers among hospitals and has very concentrated markets, particularly in urban areas.  The authors compared price trends between the large hospital chains in the state and independent hospitals or smaller groups.  The authors used actual paid claim data from one of the largest health insurers in the state.  In 2004, prices were relatively equivalent across all hospitals, around $9200 per admission.  Across all hospitals and all services, those prices had risen 76% by 2013 (compare this to the 23% that California household income grew during this period).  However, for hospitals that were part of the largest multi-hospital systems prices rose 113%, much more than the 70% they rose at other hospitals.  By 2013, it cost $4000 more per admission at these large system hospitals, and this is after carefully controlling for other factors that might explain the difference in price growth.  It is highly unlikely quality is really any better at those facilities.

This is a pure rip-off, an exercise in blatant market power to extract higher prices which damage consumers.  We have also repeatedly said that the remedy is obvious; reverse these mergers, force the hospitals to compete independently.  There is absolutely no indication that these large hospital systems provide any public benefit, in fact the only group that benefits is management, which extracts even higher compensation, often from supposedly non-profit systems.  It is a national disgrace and you can see that tens of billions of dollars in spending would be avoided through the lower prices that would result from a return to more competitive hospital markets.

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