Merger Trend Involving Hospitals, Physicians Could Affect Care Costs
U.S. hospitals have ramped up merger activity, as health reform and market dynamics encourage more coordinated care, but hospital consolidation could worsen relationships with insurers and raise health care costs, Kaiser Health News/Washington Post reports.
The number of independently owned hospitals has declined by the hundreds across the past decade because of bankruptcies and mergers, according to the American Hospital Association. For example, there are just 10 independent hospitals in Virginia, down from 23 in 2005.
Contributor to Higher Costs?
Some say that hospital consolidation ultimately boosts health care prices, as larger systems leverage their power in contract negotiations with insurers. For example, the Federal Trade Commission found that prices rapidly increased after two Chicago-area hospitals merged in 2000.The FTC ultimately forced the two facilities to separately negotiate with insurers.
In addition, consolidation could further exacerbate hospital-insurer tensions as both sides gain market power and seek to rein in spending, according to KHN/Post.
The federal health reform law pressures insurers to slow double-digit rate increases, and it encourages hospitals not only to become more efficient but also to prepare for smaller Medicare rate increases in the future.
However, experts say mergers help hospitals secure capital for an increasing wave of high-cost investments like electronic health records. Hospital officials also say consolidation could boost efficiency and lower costs, as new federal provisions that emphasize high-quality, integrated systems take effect, KHN/Post reports.
Steven Thompson -- senior vice president at Johns Hopkins Medicine -- said consolidation can help the institution become an accountable care organization and qualify for new incentives under health reform.
He added that the benefits of larger systems will lead to increased efficiency and higher reimbursement from public and private insurers, which could result in sufficient savings to eventually lower premium rates (Appleby, Kaiser Health News/Washington Post, 9/25).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.