Cross-market hospital mergers hike prices

Image removed.When hospitals merge, no matter their geographic location, higher prices almost always are the result, according to a study of cross-market hospital mergers across the United States.

The study examined 500 mergers that took place between 2000 and 2012 and was conducted by researchers at Columbia and Northwestern Universities. The conclusion: Mergers drove up hospital prices by 6 percent to 10 percent in fairly short order, even if the hospitals involved in the transaction were in completely different markets.

"If you are doing it because you think in the long run you think it will serve your community well, you should think twice," one of the article's authors, Northwestern Kellogg School of Management professor Leemore Dafny, told Marketplace. Dafny suggested some hospital operators resort to mergers because the current business climate implores them to do so as opposed to a decision to make more money.

There is already a general anxiety about hospital prices: They rose in more than 80 percent of cities or geographical regions in the U.S. between 2011 and 2013.

A recent spate of hospital mergers in the San Francisco Bay area has raised the concern of industry observers that prices could increase significantly, even though they are already about 70 percent higher than the average in California. 

Cross-market mergers have rarely draw the attention of regulators, but this new study could change that, according to Marketplace. At least three state attorneys general have asked for copies of the report.

"It's leading edge. I do think it helps attorney general's offices refine our thinking and our analytics that drive our monitoring of the healthcare market on behalf of consumers," Massachusetts Assistant Attorney General Karen Tseng told Marketplace. Tseng runs the state AG's health division.

To learn more:
- read the study (.pdf)
- check out the Marketplace article

Read more on