Every American deserves access to affordable, comprehensive, high-quality coverage and care. But health care prices continue to escalate year after year, making coverage and care less accessible for everyone.
Americans continually point to high health costs as one of their top concerns. Unfortunately, consolidation among hospitals and health systems has reached its highest point in recent history. If left unchecked, continued consolidation has been shown to lead to a reduced quality of care, reduced wage growth and higher costs for patients.
At a hearing this week in Washington, lawmakers on the House Energy and Commerce’s Subcommittee on Health echoed these concerns and expressed a bipartisan interest in addressing these cost drivers in the health care system.
Consolidation
Hospital consolidation is not a new phenomenon and even continued during the COVID-19 crisis, bolstering the anticompetitive power and practices of large hospital chains. Hospitals in highly concentrated markets can charge higher prices for medical services and have greater leverage to negotiate higher prices from health insurance providers, leading to ever-increasing health care costs for individuals and families.
What’s alarming now is that 90% of hospital markets are considered highly concentrated by Federal Trade Commission standards. Hospital concentration has been linked to average annual Marketplace insurance premiums that are 5% higher than those in less concentrated areas.
The lawmakers also highlighted the disproportionate effects of these anticompetitive practices on rural Americans. It’s true: studies also show that when hospitals don’t have any competitors within 15 miles, they charge 12% more than hospitals with four or more competitors – which can disproportionately affect rural Americans with less geographical access to hospital systems. Rural Americans are also more vulnerable to higher costs of care as short-term dollar-focused private equity firms are increasingly buying out hospitals in remote areas.
Acquiring Physicians and Site-Specific Practices
Another concern shared was the increased number of hospitals or large systems acquiring independent physician practices and how site-specific payment rates can ultimately cause increased out-of-pocket costs for patients. A study published by the Journal of Health Economics found that prices for services provided by acquired physicians increase by an average of 14.1%.
In addition, MedPAC also highlighted the payment disparity in their June 2022 report to Congress which noted, “[I]n 2022, Medicare pays 141% more in a hospital outpatient department than in a freestanding office for the first hour of chemotherapy infusion.”
In fact, drugs administered in hospital settings are often much more expensive than when administered elsewhere. Hospitals, on average, charge double (108%) the price for the same drugs, compared to pharmacies.
Evidence shows that this type of consolidation — when more and more of a region’s doctors work for the same hospital or health system — leads to higher health care prices for Americans.
Bottom Line
Any time these anticompetitive practices are allowed to proliferate, costs rack up and result in higher premiums for patients across the board.
What was clear to lawmakers, and is to AHIP, is that shaping policies that promote greater competition in hospital and health care systems won’t just benefit the government and taxpayers – all patients benefit too. AHIP was pleased to see the strong, bipartisan interest of the subcommittee and its enthusiastic energy in addressing these issues and looks forward to further partnership on this growing issue.
