The downside of hospital mergers: Bigger costs to patients

Hospital merger-mania shows no sign of slowing down, but the wave of consolidation may not be good for patients, according to the head of the Association of Independent Doctors in a blog post for Physicians Practice.

Amid high levels of hospital M&A activity, prices are rising as well, with a study earlier this year finding mergers hike prices by as much as 10 percent, even across markets.

Concerns about the phenomenon have groups such as the Association of Independent Doctors collaborating with the Federal Trade Commission to block two proposed deals, writes Executive Director Marni Jameson.

The first, a merger between Pennsylvania’s Penn State Hershey Medical Center and PinnacleHealth System, was approved by a federal judge in May, and the FTC is working to reverse the decision on appeal. The FTC claims the venture would reduce competition for  acute care hospital services in the Harrisburg area, and lead to reduced quality and higher healthcare costs.

The second deal involves a decision by an Illinois federal district judge in favor of Advocate Health Care and NorthShore University Health Systems in June over the FTC’s objections that the merger would hurt care quality while increasing prices. Local health insurers were also concerned about the latter merger, with independent healthcare consultant Allan Baumgarten saying at the time that the deal could threaten such payers as Blue Cross & Blue Shield of Illinois because the providers could command higher reimbursement rates.

Healthcare executives who are in favor of mergers often argue that the partnerships will improve efficiency to the point of lowering prices, but no research suggests consolidation leads to cheaper services, writes Jameson. In June, a University of Southern California study indicated patients pay $4,000 more at big, multi-hospital health systems compared to their independent counterparts.

“Our best hope is that the U.S. Court of Appeals for the Third and Seventh Circuits will take a clear-eyed view, and see the merger attempts for what they are--another way for hospitals to profit at consumers' considerable expense,” Jameson writes. “The FTC's job is to prevent monopolies from forming that could harm Americans, but judges like those who ruled in the Hershey/Pinnacle and Advocate/Northshore cases make the job difficult.”

- read the post
- here's the FTC announcement
- here’s the study