Our view: When hospital chains merge, you pay the bill
Health insurers are not the most beloved companies. They deny claims, bury people in paperwork, and generally make life more difficult.
But a good case can be made that America’s health care woes lie more with its providers than its insurers. Some communities are served by a single hospital or group of specialists. Some patients are reliant on a single drug. That gives these businesses enormous leverage to hike prices.
In theory, insurance companies hold down costs by driving hard bargains with providers. In reality, they find it difficult to do so.
UnitedHealth Group is the largest private health insurer, with about 11% of the overall market. Everyone else is less than 10% (though in local and regional markets there is more concentration).
That makes these insurers plenty big enough to beat up on consumers, but too small to take on powerful health providers.
The result: In the USA, 18 cents of every dollar spent goes to health care each year. In other developed countries, health care expenditures are much less, in the range of 10 cents to 12 cents per dollar.
Which makes recent trends in the hospital industry all the more troubling. Two major hospital chains, Ascension and Providence St. Joseph Health, are in talks to merge, a move that would create a 191-hospital colossus operating in 27 states.
This comes on top of a raft of other hospital mergers and announced mergers. That they have been in the nonprofit space, including a proposed chain of 139 Catholic-run hospitals, does not change the economics.
These massive businesses run much as their for-profit brethren — and will put pressure on for-profits to merge as well. That won’t be good for consumers, or the ridiculously high premium the American economy pays for a health care system that lacks effective cost controls.
Not all mergers in health care are problematic. The proposed combination of CVS, the owner of drug stores and walk-in clinics, with Aetna, a major insurer, holds intriguing possibilities for efficiencies and more comprehensive tracking of health care decisions.
It could also be argued that there should be more consolidation among insurance companies. This might not be a hugely popular concept, but it would give them more leverage to say no to costly increases demanded by hospitals and other potent health care providers.
At the very least, it’s time to take a critical eye to the mega hospital empires being erected. They could be very hazardous to your health.