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AHIP: Hospital Consolidation is Driving Health Costs

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   February 09, 2010

When the Massachusetts Attorney General's Office released a recent report sharply critical of the state's healthcare costs, one of the office's most often used words was "driver"—referring to hidden forces steering potentially out of control expenses.

Reacting to the AG's decision, health insurers' major lobby in Washington blames hospital consolidation as an often ignored reason for the soaring price of healthcare.

"The data shows that [hospital consolidation] has increased healthcare costs—with a higher price for healthcare services," says Robert Zirkelbach, spokesman for the America's Health Insurance Plans. "It's something that hasn't been paid attention to. It's certainly something we're looking at."

Zirkelbach pointed to studies and reports:

  • Hospitalization markets have increased their concentration by 47% during a 13-year period from 1990 to 2003, according to the Robert Wood Johnson Foundation. In addition, the foundation reported 88% of U.S. metropolitan areas have highly concentrated hospital market areas.

  • Significant price increases for hospital services after mergers—including findings by the Federal Trade Commission and Department of Justice after extensive 2002 and 2003 hearings—and reports from the Institute for Health Care Management  and the Robert Wood Johnson Foundation.

These reports show higher prices for consumers and insurers that do not lead to better care, he says.

The report from the Robert Wood Johnson Foundation says "research suggests that hospital consolidation in the 1990s raised inpatient prices by at least 5% and likely significantly more. Prices increase 40% or more when merging hospitals are closely located."

Generally, when "hospitals merge, prices rise for consumers and quality declines," according to Zirkelbach.

The issue of hospital consolidation was raised the Massachusetts Attorney General's Office preliminary report that found Massachusetts insurance companies pay some hospitals and doctors twice as much as others for essentially the same patient care. The report suggested the state's best-paid providers were the main driver of the state's soaring healthcare costs.

Attorney General Martha Coakley says the findings "raise concerns that existing systemic disparities in reimbursement may, over time, create a provider marketplace dominated by very expensive "haves" as the lower and more moderately priced "have nots" are forced to close or consolidate with higher paid systems.

Joe Cantlupe is a senior editor with HealthLeaders Media Online.

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