Bigger hospitals, mergers drive higher prices

Large hospital systems are using their size and market clout to boost prices, a trend that started long before the health reform law passed, according to a study in this month's Health Affairs.

It's the "must-have" hospital systems and large physician groups--providers that health plans must include in their networks--that can command hefty payment rates from insurers, the study found.

The study noted that providers offering specialized or unique services also have increased market clout and can leverage higher prices. Meanwhile, stand-alone community hospitals usually receive payments in line with Medicare fees, Politico reported.

"What we found is that the leverage of some hospitals is growing," report coauthor Paul Ginsburg, president of the Center for Studying Health System Change, told Politico. "That's a contributor to rising healthcare spending."

So hospitals are looking to buy "must-have" hospitals and services to enhance their market clout and demand higher prices from payers. However, such mergers are oftentimes not subject to anti-trust review, according to the National Journal.

A March report by Moody's Investors Service reinforces this trend of healthcare consolidation. It concluded that the ever-changing healthcare environment is prompting hospital groups to grow even bigger, with hospitals teaming up with other facilities, insurers and for-profit companies. It agreed that higher payments from insurers and a competitive advantage in the marketplace are driving the wave of hospital consolidations.

To learn more:
- read the Politico article
- check out the study abstract
- read the National Journal article
- here's the Moody's report