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Eroding Competition: Nearly 3 in 4 Healthcare Markets Highly Concentrated

By Steven Porter  
   September 17, 2019

Consolidation advanced noticeably between 2012 and 2016, according to a report by the Health Care Cost Institute.

The top-line finding of the Health Care Cost Institute's latest report won't surprise anyone who's been paying attention to the industry in recent years: markets are increasingly consolidated.

The number of metro areas that were either highly or very highly concentrated increased to 81 in 2016, from 75 in 2012, out of the 112 markets studied, according to the HCCI Healthy Marketplace Index (HMI) report released Tuesday. That means nearly three-quarters of U.S. healthcare markets are highly concentrated.

The report points to Milwaukee, Wisconsin, and Houston, Texas, as examples of the consolidation trend. Those two markets were highly concentrated in 2016 after being moderately concentrated in 2012. But the increases in concentration levels were widespread.

"Our findings add to the growing consensus that most localities have highly concentrated hospital markets, and this is becoming increasingly true over time," said Bill Johnson, PhD, an HCCI senior researcher and an author of the report, in a statement.

"The increased concentration we observed can be driven by many factors such as hospital closures, mergers and acquisitions, changes in hospital capacity, patient preference, or changes in patients' insurance networks," Johnson added.

But the report goes further than that top-line finding and suggests that rising consolidation may be related to higher prices. As healthcare leaders and policymakers alike look for ways to tamp down the cost of care, the report points to a growing body of literature that documents a relationship between market concentration and heightened prices.

"Increasingly concentrated hospital markets have been linked to the rising cost of hospital care by nearly every expert in the field," HCCI President and CEO Niall Brennan said in a statement.

The report found a "slightly positive correlation" between market concentration changes and inpatient price index changes overall. But some metro areas bucked the pattern, such as Memphis, Tennessee, where prices decreased slightly as concentration increased.

"Although consistent with previous literature, our analysis does not necessarily show that increases in concentration caused increases in prices," the HCCI report states. "Changes in both measures could be due to many factors other than market consolidation which are related to both concentration and prices."

That caveat will likely be key for the American Hospital Association and others who claim hospital mergers and acquisitions have benefitted patients

Related: Why Some See Healthcare's Vertical Mergers as Good and Necessary

Related: Hospitals Claim Their Mergers Reduce Costs, Disputing Other Studies

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.


The number of concentrated markets, out of 112 studied, increased from 75 in 2012 to 81 in 2016.

The report links rising consolidation to waning competition and higher prices.

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