Hospital consolidation fuels price increases

Consolidation among hospitals leads to a rise in prices--a trend magnified in regions where a single party holds large market share, concludes new data from the Robert Wood Johnson Foundation (RWJF).

"When hospitals merge in already concentrated markets, the price increase can be dramatic, often exceeding 20 percent," states a portion of the report, which updates prior research performed by the foundation.

The report comes as consolidation in the hospital market has been heating up in recent months. A new survey of healthcare leaders by national healthcare public affairs firm Jarrard, Phillips, Cate & Hancock suggests the recent upholding of the Patient Protection and Affordable Care Act will spur even more activity.

However, the RWJF report also concludes that such hospital consolidation leads to improved quality of healthcare delivery--but only if the payer has significant leeway in setting prices, such as Medicare. "The evidence is more mixed from studies of market determined systems," the report notes.

It also found that the merger of hospitals and physicians into a single system had no effect on either prices or quality.

"Studies find that consolidation was primarily for the purpose of enhanced bargaining power with payers, and hence did not lead to true integration," the report states. "Consolidation without integration does not lead to enhanced performance," it adds.

To learn more:
- here's the RWJF report (.pdf)
- read the Jarrard Phillips statement

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