When hospitals merge, patients often pay more
The nation’s hospitals have been merging at a rapid pace for a decade, forming powerful organizations that influence nearly every health care decision consumers make.
The hospitals have argued that consolidation benefits consumers with lower prices from coordinated services and other savings.
But an analysis conducted for The New York Times shows the opposite to be true in many cases. The mergers have essentially banished competition and raised prices for hospital admissions in most cases, according to an examination of 25 metropolitan areas with the highest rate of consolidation from 2010 through 2013, a peak period for mergers.
The analysis showed that the price of an average hospital stay soared, with prices in most areas going up between 11 percent and 54 percent in the years afterward, according to researchers from the Nicholas C. Petris Center at the University of California, Berkeley.
The new research confirms growing skepticism among consumer health groups and lawmakers about the enormous clout of the hospital groups. While most political attention has been focused on increased drug prices and the Affordable Care Act, state and federal officials are beginning to look more closely at how hospi- tal mergers are affecting escalating health care costs.
During the Obama years, the mergers received nearly universal approval from antitrust agencies, with the Federal Trade Commission moving to block only a small fraction of deals. State officials generally looked the other way.
President Donald Trump issued an executive order last year calling for more competition, saying his administration would focus on “limiting excessive consolidation throughout the health care system.” In September, Congress asked the Medicare advisory board to study the trend.
But not only have big consolidations continued, the behemoths have further cemented their reach in some regions of the country by gobbling up major doctors’ and surgeons’ practices.
“You have to watch for these systems throwing their weight around,” said Xavier Becerra, the California attorney general whose office has sued Sutter Health, a sprawling system in the northern part of the state. “We are looking for cases where consolidation does nothing for efficiency and leads to distortions of the market.”
Ted Doolittle, who heads Connecticut’s Office of the Healthcare Advocate, has fielded angry complaints from residents, but he sees few options available to offi- cials. “A lot of this is too little and too late,” he said.
PATHS FOR GROWTH
The latest giant hospital consolidations continue to stir concerns. Dignity Health and Catholic Health Initiatives, two large chains, are expected to become one of the nation’s largest groups – with 139 hospitals in 28 states – by the end of the year. And two of Texas’ biggest systems, Baylor Scott & White Health and Memorial Hermann Health System, recently announced plans to combine.
In Connecticut, the New Haven area has witnessed the most significant decline in competition. Yale New Haven Health, one of the largest hospital groups in the state, took over the only competing hospital in the city and has also aggressively expanded along the state’s coast. The group recently added another hospital to its collection, merging Milford with its Bridgeport location.
Although the price of a hospital admission in the New Haven-Milford area was already three times as much as in other parts of Connecticut, prices surged by 25 percent from 2012 to 2014, compared with 7 percent elsewhere in the state, according to the Petris Center.
In the national analysis, a third of the metropolitan areas experienced increases in the cost of hospital stays of at least 25 percent from 2012 to 2014, to at least $15,000 from roughly $12,000.
Prices rise even more steeply when these large hospital systems buy doctors’ groups, according to Richard Scheffler, director of the Petris Center.
“It’s much more powerful when they already have a very large market share,” said Scheffler, who recently published a study on the issue in Health Affairs. “The impact is just enormous.”
Thousands of Connecticut residents were stranded without a local hospital last year when another big hospital group, Hartford HealthCare, battled the state’s biggest health insurer over how much it would charge for patient care.
Its six hospitals are clustered around the state capital and are the only resort for residents in broad swaths of the eastern part of the state. This month, it announced plans to add a seventh hospital to its network.
“These systems are empire-building, there’s no question,” said Jill Zorn, a senior policy officer for the Universal Health Care Foundation of Connecticut, which seeks to improve access for residents. “But to whose benefit?”
Numerous studies by economists and others have underscored how hospital consolidation is driving up the cost of medical care. “Within the academic community, there is near unanimity,” said Zack Cooper, a health economist at Yale University who is among a group of researchers that has looked at the way dominant hospitals affect prices.
The emergence of a one-hospital town is inevitable in many places. In the Parkersburg, West Virginia, area, St. Joseph’s merged with neighboring Camden-Clark Memorial in 2011, and then they were consumed by what is now the state’s largest health system.
“We’ve got it down to a single campus,” said Albert L. Wright Jr., chief executive of West Virginia University Health System. “Parkersburg is not big enough to support two hospitals.”
Residents can get most care locally, but they go to Morgantown, where the academic medical center is situated, for complex conditions. “We’ve elevated the level of care,” Wright said.
But private insurers are paying more. In the Parkersburg-Vienna area, the overall price of a hospital stay increased 54 percent from 2012 to 2014, after the mergers. That is compared with 10 percent elsewhere in the state, according to the Petris Center.
Large systems “get paid better by some of the insurers,” Wright said.
In a national analysis, a third of the metropolitan areas experienced increases in the cost of hospital stays of at least 25 percent from 2012 to 2014, to at least $15,000.