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More on the Negative Effects of Hospital Mergers

By June 30, 2024Commentary

I have written many times over the years about the anti-competitive and anti-consumer impacts of the consolidation taking place in the provider and health plan markets.  A new paper at the National Bureau of Economic Research provides further evidence.  The authors looked at the impact of hospital mergers on prices and on who ultimately pays for those higher prices.  Higher hospital prices result in higher health insurance premiums, as health plans pass on their higher costs.  And the employers who pay more for health insurance for their employees have to make up for that in some way, and they tend to do so in part through labor costs.  For each 1% increase in hospital prices after a merger, total payroll dollars and employment go down by about .4% in sectors other than health care.   Wages decline by .27% for that same 1% price increase.  So if after a hospital merger prices go up by 10%, wages go down by 2.7%.  Lower income workers are impacted the most.  And in a somewhat bizarre finding, those increased hospital prices are also associated with greater rates of death by suicide and drug overdose, likely among those losing their jobs.  This consolidation has to stop and should be reversed, with large hospital systems forced to break up and become more efficient.

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