Hospital “Merger Mania” Leading to Higher Bills for Patients

by LAS

Nationwide, we are seeing more and more concentration of medical care via mergers, acquisitions, joint operating agreements, and partnerships with doctors and other providers. However, these mergers rarely result in a cost savings for either the consumer or the hospitals themselves.

Over 100 hospital mergers took place in 2012, and the pace shows little sign of slackening. What advantage does this have for the hospitals? One effect is that by banding together, hospitals have greater bargaining power – but not, as you might hope, to negotiate lower prices with suppliers. Nope. The hospitals band together to bargain with the insurers for HIGHER payments.

This is partly due to less competition in a given city or county. With fewer providers or networks, the consumer cannot just go across the street for a knee replacement.

Less competition translates as higher costs to the consumer – a study published in 2011 showed that private insurers paid 13 to 25 percent more for procedures done in areas with less competition.

The increased cost is often paid by hapless consumers in the form of higher copays, higher insurance premiums, higher deductibles, and miscellaneous fees.

The real insult is that the quality of care has little relationship to the cost of care. Studies have not found any improvement in quality to match the increase in costs. 

A similar hospital merger boom in the 1990s resulted in increased patient costs of anywhere from 5 to 40 percent.