As anti-monopoly critics feared, hospital market concentration leads to higher hospital prices, according to a new study published in Health Affairs. However, the same is not true for concentrated health plans, which actually lower hospital prices, according to Rand Corporation researchers.
Despite worries from both sides, providers and payers cautioned against market dominance. Researchers found that hospital concentration exceeds health plan concentration, meaning hospitals face less competition with health plans than insurers do with hospitals in their markets. In fact, 64 percent of hospitals operate in markets where health plans are not very concentrated, according to the study. Only 7 percent of hospitals are in areas of concentrated health plans.
"There may be a benefit for consumers when health insurance plans are more consolidated because it tends to drive down hospital costs," said Glenn A. Melnick, an economist at RAND and the Blue Cross of California Chair in Health Care Finance at the USC School of Policy of Planning and Development, in a press release. "As long as there is enough competition to keep health plans honest, the consolidation has a good result on prices."
As mergers are under the close watch of regulatory agencies, the study authors called for policies to help guide deals sure to come in the future.
"[C]onsumers would benefit from policies that maintained competition in hospital markets or that would restore competition to hospital markets that are uncompetitive," the authors wrote.
For more information:
- read the press release
- here's the study abstract
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