Healthcare consolidation to cause massive inflation

Adding to healthcare consolidation worries, mergers and acquisitions among hospitals, health systems and physician practices are producing a spike in inflation, according to a new article from consulting firm Alvarez & Marsal. That's because with healthcare consolidation comes strong pricing power and higher reimbursements.

The shift to outpatient care, in particular, has triggered the wave of healthcare consolidations, given that doctor practices, ambulatory surgery centers, and imaging and laboratory facilities are key to enhancing outpatient visits and procedures, the article noted.

With that in mind, hospitals increasingly are acquiring practices and converting them to outpatient entities or outpatient hospital departments to reap bigger payments from both Medicare and private insurers, FierceHealthcare previously reported.

And with more reimbursement dollars available for bigger hospital groups, it's no surprise healthcare saw M&A activity jump 21 percent in 2012 from the prior year.

But although healthcare consolidation is associated with higher payments from insurers, enhanced efficiency and increased market clout, it's no stranger to antitrust concerns and other legal disputes.

In fact, the Federal Trade Commission tried to block four hospital merger deals in 2012. The recent healthcare targets included ProMedica and St. Luke's Hospital in Ohio, Reading Health System and Surgical Institute of Reading in Pennsylvania, OSF HealthCare and Rockford Health System in Illinois, and Phoebe Putney Health System and Palmyra Park Hospital in Georgia.

For more:
- here's the Alvarez & Marsal article