Study: Provider consolidation outpaces payer in more than half of metro areas 

A stethoscope and paper money.
The study found that about 90% of metropolitan statistical areas are either “highly concentrated” or “super concentrated” provider markets. (Getty/utah778)

Healthcare’s "merger mania" has led to significantly consolidated provider markets, which could have some major downsides for patients, according to a new report.

A new blog post from the Commonwealth Fund stratified provider and payer consolidation across metropolitan statistical areas and found that about 90% of MSAs are either “highly concentrated” or “super concentrated” provider markets. 

The researchers, based at the University of California Berkeley School of Public Health, found that 47.1% of MSAs were “highly concentrated” and 43% were “super concentrated,” the highest level in the study. 

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Payers were more likely to fall in the middle, however, according to the report. About 54.5% of metropolitan areas were “highly concentrated” insurance markets, and 36.9% were categorized as “moderately concentrated.” Just 5% of MSAs were “super concentrated” payer markets. 

RELATED: Healthcare mergers post a patient safety risk, study finds 

Provider consolidation was higher than insurer consolidation in 58.4% of metro areas, while payers outpaced providers in just 5.8%. Markets where providers and payers are both highly concentrated can allow payers greater negotiating leverage to lower prices, the researchers said. 

Experts have warned that consolidation in healthcare rarely pays off for patients, at least in the immediate aftermath of a deal. Analysts have said that consolidation is also a major driver of current healthcare spending increases

Providers have defended the drive for consolidation as necessary to ensure access and affordability and to build scale. Leemore Dafny, Ph.D., a professor of business administration at Harvard Business School, said that doesn’t mean the industry’s appetite for mergers isn’t likely to slow down because there are limited anticompetitive checks and balances in the healthcare sector.

That is especially true for deals between providers. Several big-name payer mergers were derailed by anticompetitive challenges, while provider mergers and acquisitions are given more leeway. The researchers echoed that sentiment, saying that regulators at both the state and federal level need to be doing more to scrutinize such deals. 

RELATED: Hospital consolidation alone hasn’t delivered on promises of interoperability 

States should take the lead in this effort, the researchers said. State regulators know the market forces at work in certain metro areas more intimately; for example, some metropolitan areas may not be highly concentrated because they comprise multiple markets. 

That knowledge can better allow state officials to examine other competitive factors that could ease the impact of consolidation—such as boosting competition—and find ways that providers in highly concentrated markets can build scale to reduce costs. 

“It is important for regulators to increase the likelihood that the benefits of consolidation ultimately flow to consumers and employees,” the researchers wrote. 

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