The Biden Administration’s recent executive order hit a bullseye on one of the leading market failures behind surprise bills: anticompetitive hospital consolidation. It’s no surprise that “thanks to unchecked mergers, the ten largest healthcare systems now control a quarter of the market,” and the Biden Administration highlights what has evolved as a major pain point for consumers. “Research shows that hospitals in consolidated markets charge far higher prices than hospitals in markets with several competitors,” leaving so many Americans and their families facing bankrupting charges that they can’t afford. Here’s how that trend is playing out across the country now:
- Modern Healthcare: Mergers and acquisitions among regional hospitals are on the rise – “Hospital merger and acquisition activity is rebounding as systems pursue regional combinations, according to a new report. The total revenue among hospitals that announced deals in the first half of 2021 was $17.2 billion, which was the second-highest tally since 2015, Kaufman Hall data show…Prices increased by 7% to 10% when hospitals 30 minutes to 90 minutes apart merged, a 2018 study by Harvard University and Columbia University researchers found. While there were no significant price changes resulting from cross-state mergers, market power may arise from combinations over broad geographic areas due to a common customer base, often large employers looking to cover their employees in different regions. This can reduce competition and lead to price increases, according to the study. Meanwhile, many large systems made more money in the second half of 2020 as they treated sicker patients who were often commercially insured. They are expected to direct that capital, in part, toward mergers and acquisitions.”
- Wall Street Journal: How Much Does a C-Section Cost? At One Hospital, Anywhere From $6,241 to $60,584 – “When a woman gets a caesarean section at the gleaming new Van Ness location of Sutter Health’s California Pacific Medical Center, the price might be $6,241. Or $29,257. Or $38,264. It could even go as high as $60,584…Hospitals, for their part, set prices that can have little bearing on the actual cost or value of a service. They often operate without knowing the cost of procedures, unlike other industries that closely track and manage expenses, said David Cutler, an economist at Harvard University who studies healthcare spending. Hospitals instead set prices based on their own targets for overall margins and according to what the market will pay, he said. Hospitals typically rely on privately insured patients for their margins. One study looked at the profits of more than 2,800 hospitals over a decade and found hospitals that boosted margins didn’t cut costs, but instead raised revenue by increasing the rates they charged to commercial insurers. Other studies found hospitals under revenue pressure do manage costs more tightly to protect margins, but where hospitals have market power, they raise prices.”
- Revenue Cycle Intelligence: 1 in 5 Childbirths Lead to Surprise Billing, Study Shows – “One in five privately insured families who had in-network deliveries in 2019 received surprise bills for childbirth or newborn hospitalizations, according to a study published in JAMA Health Forum. Families faced a median total liability for potential surprise bills of $744.”
The impact of anticompetitive hospital consolidation is far-reaching for consumers – and because we all end up paying the cost through higher premiums, it’s critically important that the rulemaking process for the No Surprises Act counters the inflationary pricing from hospitals, out-of-network providers and private equity firms. Read more on how the Biden Administration can make sure patients are protected from surprise bills here.