New evidence from the Congressional Budget Office (CBO) shows that the prevalence of surprise medical billing by private equity-backed doctors and hospitals is a prime example of providers exploiting their market power to demand higher prices from health insurance providers, employers and ultimately, consumers. The report reinforces the critical need to maintain the consumer protections implemented through the No Surprises Act, particularly as hospital and provider groups attempt to dismantle those safeguards with flawed legal arguments.
According to the CBO report, prices charged for hospital care and physicians’ services increased by nearly three percent annually between 2013 – 2018. The 2.7 percent annual increase was faster than the average increase in inflation during that same period.
One of the many factors behind rising prices was increased concentration of market power between providers and hospitals. CBO noted that, “evidence suggests that concentration in the markets for hospitals’ and physicians’ services has been growing and that, in many areas, those markets are now moderately or highly concentrated.” The rapid take-over by private equity firms has only accelerated this harmful trend, with evidence suggesting that “a growing number of health care providers have been acquired by private equity firms, which may leverage providers’ market power to raise prices.”
Additional highlights from the CBO report underscoring the cost impact to consumers, employers and employees are included below:
- “For physicians and other providers, another study found that after a private equity firm that employed emergency physicians entered into contracts with hospitals, the percentage of emergency care billed out of network at those hospitals rose by 83 percentage points, and the prices paid to those emergency physicians rose by 114 percent.”
- “[Hospitals’ acquisitions of physicians’ practices] can also increase hospitals’ market power in at least two ways. First, they increase the amount of care billed in facilities owned by hospitals and reduce the amount billed in physicians’ offices. Second, they lessen the ability of rival hospitals to refer patients to the acquired physician’s practices and increase the frequency of referrals within systems. Such acquisitions can also increase market concentration among physicians by consolidating them into larger groups.”
- “Anesthesiologists, emergency medicine specialists, family practitioners, and dermatologists were the most common types of physicians in acquired practices. Another study found that roughly 7 percent of short-term acute care hospitals, responsible for 11 percent of total patient discharges, were acquired by private-equity-backed ventures between 2003 and 2017.”
- “Evidence about the effects on prices when private equity firms acquire medical providers has been mostly anecdotal, until recently. A recent study found that after private equity firms acquired hospitals, the ratio of those hospitals’ charges to costs rose by 7 percent overall, and by 16 percent in emergency rooms, relative to otherwise-similar hospitals not bought by private equity firms.”
To view the full report, click here.