Last month, a team of researchers published a new study in the National Bureau of Economic Research (NBER) adding to the growing body of evidence that hospital-led consolidation distorts the healthcare market by driving up costs without improving quality of care. The study highlights how hospital systems buy up private physician practices to limit competition and exploit their market power, leaving patients, employers, and insurers with inflated prices and fewer alternatives to turn to as a result.
Here are three key findings from the NBER study:
- Data show the practice of hospital consolidation has exploded in recent years: between 2008 and 2016, the share of physician-affiliated hospitals climbed nearly 72%, translating to an increase of more than 155,000 physicians nationally.
- NBER analysis shows that when hospitals integrate with physician practices, patients are often ultimately steered away from competitors, despite the existence of regulations that prohibit kickbacks and profit-maximizing behavior. These dynamics reduce consumer choice and give large hospital systems greater market power to increase prices. In fact, the study highlights how in cases with great “steerage potential” (i.e., where doctors can shift patients away from rival hospitals), hospital prices rose over 7%, compared to just 1.7% when no steering was possible. Similarly, physician prices jumped 24% when hospitals had stronger leverage with insurers or increased local physician market share.
- When hospitals take over OB-GYN practices, prices increase across the board. Just two years after integration, prices for labor and delivery climbed by $475 on average; physician prices rose by a staggering $502.
As with other hospital price increases, the analysis showed no reported improvement in patient outcomes.
These patterns reflect what we’ve seen across the board –– when large hospital systems consolidate markets, they raise prices for patients without providing better care; they reduce transparency and limit choice; and they push independent physicians out of the market.
Fortunately, there’s growing recognition around the need to check hospitals’ pricing practices at both the national and state levels. For example, Indiana recently passed meaningful legislation to curb anti-competitive contracting and strengthen 340B transparency, and at the national level, the Senate Health, Education, Labor and Pensions (HELP) Committee is kicking off their policy agenda with a hearing focused on health care affordability, spotlighting many of these concerns.
These are important first steps, but as employers, we know there’s still more work to be done. Policymakers must put a stop to these abuses by reining in unchecked hospital pricing power and demanding greater transparency, accountability, and value for the public.