Readers of the blog understand that hospital market concentration is one of my biggest concerns in regard to affordable health care and deleterious impacts on quality. A new analysis from the Health Care Cost Institute underscores just how concentrated most local hospital markets have become. (HCCI Report) The analysis looks at 112, mostly urban, hospital markets, using large health plan data. The analysis of prices finds wide variation, with the coasts tending to be higher. Northern California had prices much higher than the median. Baltimore had relatively lower prices. Prices in San Jose were over twice those in Baltimore. When dividing services into inpatient, outpatient facility and clinician categories, price levels are not necessarily the same in a particular market across the categories. Prices in Baltimore were consistently low across the categories and those in San Francisco consistently high. But Orlando had only higher than median inpatient prices, while Green Bay and El Paso had high clinician ones. And high prices weren’t always correlated with rapid price growth–some lower price markets had substantial price rises since 2012 and some high price markets had slow price growth. New York and Tucson have had notable price growth in recent years. There was less variation in hospital use than in hospital prices. Some high price markets, like California, had relatively low use and Baltimore, which had the lowest prices, had some of the highest utilization. About half of all markets had utilization statistics within 10% of the median. And again, there was some difference in relative use across the three categories of service. In general, overall utilization has dropped in most markets and any grow has been very moderate. Outpatient showed the largest growth. There was not strong correlation between price and use levels, although there was a tendency for high-priced markets to have lower use and vice versa.
The report also examines concentration levels and changes in those levels since 2012. 81, or over 70%, had markets that would be considered highly concentrated. Only a handful of markets would be classified as unconcentrated. Larger urban areas tended to be less concentrated, but that may not full account for submarkets within the large geographic area covered by these cities. Almost all markets become more concentrated over time, with only a few of the most highly concentrated markets showing a decline. And concentration was linked to price level and markets which had consolidation activity had larger increases in prices. While use of inpatient hospital care has dropped substantially, it still accounts for over 30% of all health spending, largely because price increases have more than made up for volume drops. And hospitals account for an increasing share of outpatient services. The abuse of market power clearly has greatly contributed to higher private health insurance premiums, with no corresponding gains in quality or other outcomes. And hospitals tend to just take their excessive profits and pay executives more, build unnecessarily fancy facilities and acquire other types of providers, including physician practices, to further extend their market power. This will have to be addressed either by structural reform or regulation of prices if we are to see any meaningful relief from the pain.