Why Health System Consolidation Is Bad for Consumers

I have written frequently about the untoward consequences of the unbridled consolidation of health care providers.  Hospitals have merged to form large systems and they buy up physician practices and other providers to control even more of the health care dollar.  There is obviously only reason why they do this–to increase market power and prices.  It has nothing to do with anything other than that, most certainly not quality of care, which generally worsens in highly consolidated markets.  A couple of pieces of research illustrate the harms resulting from these practices.

In the first, the impact of hospital acquisitions of physician practices with substantial surgical volume in Florida was examined.  Following the acquisition, the doctors shifted on average 10% of surgery and procedure cases from ambulatory surgery centers to the acquiring hospital.  These shifts increase costs to payers and to patients and may override convenience and quality concerns.   One would expect that over time, the hospitals pressure the physicians to stop using external surgicenters at all.  (JHE Article)

The second article focuses on Medicare’s absurdly stupid policy of paying more for the exact same outpatient service at a hospital as compared to a physician office.  This not only costs Medicare and taxpayers more, it costs patients more.  There is no quality of care justification for this divergence in payment.  The article estimates that having services performed in hospital outpatient settings costs $114,000 more a year in physician charges than if the same services were billed in the physician’s office.  So you can understand the powerful incentive, for the hospital and the doctor, for hospitals to acquire physician practices.  The hospitals make money and the doctors get paid more and the consumer and taxpayer gets screwed.  But hospitals make big political donations, so Medicare doesn’t change the policy.  (HSR Article)

And one more article on the topic finds that when a hospital buys a physician practice, it not only increases what it charges for the doctor’s services, but it increases hospital inpatient prices as well, by as much as 3-5%.  These increases once again affect not just the health plan, but patients who have copayments, coinsurance and deductibles and who pay part of their premiums.  And once more the authors find no evidence of any quality improvement that might justify the increased prices, on the contrary, there is some indication that readmission rates worsened.  Where are the regulators supposedly looking out for the consumer?  (JHE Article)