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Hospital Acquisitions and Prices

By August 15, 2023Commentary

I believe it is undisputed that hospital consolidation and the buying of physician practices and other health care providers by hospital systems is likely the single biggest cause of higher prices in the health system, prices which cost consumers and taxpayers a lot of money.  This report comes from a large US health plan company, formerly Anthem, so read with that in mind, but it is completely consistent with a substantial body of independent research.  The percent of hospital beds that are controlled by a system has risen from 58% in 2000 to over 80% currently.  25% of hospital markets have only one system, so no competition.  And there were scale advantages to being acquired for an independent hospital–their operating expenses declined by an average 6%, largely driven by labor costs.  So you could expect lower prices, right?  Absolutely not, compared to hospitals that remained independent prices at the acquired hospitals for major diagnostic categories of admissions rose 5% to 8%.  And measured by readmission rates, quality declined, because those rates increased.    (Elevance Report)

There simply is no excuse for allowing one more hospital acquistion and the right policy would be to force divestiture in every market and a return to  markets which actually have some competition in price and quality.

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