Hospital Concentration and Insurance Premiums

By April 17, 2019 Commentary

It wouldn’t be a typical month on this blog if I don’t have at least one post on a study about the evils of hospital concentration.  So here it is, courtesy of Health Affairs.   (HA Article)  The authors attempted to ascertain the impact of hospital concentration on premiums in the individual insurance exchange markets created by the ACA.  Hospital market share was calculated by percent of discharges by zip code and by the usual HHI index.  Insurance premiums were derived from the RWJ Foundation’s database for the years 2014 through 2017.  The primary outcome was the premium for the second-lowest cost silver plan, which is the benchmark for subsidies, and for a 64 year-old non-smoker.  Hospital markets were divided into three terciles of concentration.  The most concentrated markets tended to have lower median incomes, fewer African-American residents, and more older ones.  They tended to be more rural.  The mean annual premium in the least concentrated tercile was $624 less than in the most concentrated one, or about 5% lower on an adjusted basis.  Having more insurers on an exchange in a market tended to lower premiums but only to a modest degree that did not significantly change the effect of hospital concentration.

Hospitals put out the usual crap about how mergers lower costs because of scale efficiencies and deliver better quality through care coordination, etc.  There isn’t any evidence to support any of that nonsense, as the current piece of research demonstrates.  These mergers happen so that management, who are the ones pushing concentration, can make even more money and extort higher prices from commercial insurers.  Previous work has focussed on the interaction between hospital and health plan concentration levels.  Where, as is increasingly the case, both hospital and health plan markets, they tend to coexist in a mutually beneficial symbiosis that raises prices for everyone.  Health plans are happy to pay hospitals more and use that as an excuse for raising premiums.  And once again, the solution is pretty obvious, except to politicians eager to keep getting big campaign contributions–force divestitures by the big health systems and health plans.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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