What Happens When Healthcare Providers Consolidate? You Pay More.

March 28, 2017

Teamwork may (sometimes) make the dream work, but when your healthcare providers team up, it can hinder your goal of saving money at your next doctor visit.

What do we mean by “team up”? One word — consolidation.

One way healthcare providers consolidate is if hospitals merge (or get acquired by a health system.) Hospitals consolidate for many reasons, but can end up placing a fiscal burden on patients when prices rise, due to less competition. Back in 2000, Rex Healthcare in Raleigh announced its merger with UNC Health Care, to mixed reactions. (Pop culture example: when the fictional Seattle Grace Memorial Hospital and Mercy West Medical Center merged in the medical drama Grey’s Anatomy to become Seattle Grace Mercy West Hospital.)

Another comparable practice is physician-hospital consolidation. Historically; health systems, hospitals and physicians have been separate financial organizations. Nowadays, it’s not uncommon for all three to function as a combined institution. Ask yourself this: does your doctor own their own practice or are they part of a larger healthcare system?

But enough chit-chat — let’s get into how all of this consolidating affects you and your pocketbook.

How Prices and Consolidation Play Out

For millions of Americans, the health plan they get through their work (employer-sponsored health insurance) pays more to hospitals that have little or no competition, according to a study published by the National Bureau of Economic Research. So much more that private insurance prices were 15% higher when hospitals had no competition compared with areas with at least four hospitals. (That’s a difference of roughly $2,000 per visit!)

When it comes to doctors and hospitals coming together, programs like Medicare encourage consolidation to increase efficiency. A downside to this practice is that it can drive up costs. Hospital and physician services account for more than half of national health spending and the money to pay the bills is coming from you. A study by the JAMA network found that when physician-hospital integration increased, so did outpatient spending — which was driven almost entirely by rising prices.

As AHIP reported, when these types of consolidations happen, they give hospital systems stronger market power to drive up prices for patients.

The moral of the story for your checkbook? Two (or more) hospitals/hospital systems are better than one. You may also want to visit your neighborhood doctor for your next routine check-up, instead of one who works for a healthcare system — at least for your wallet’s sake.

No matter where you get your healthcare or who you get it from, costs are high. One way to help curb the costs of healthcare is to fight back against state-based mandates that drive up the cost of health insurance for everyone. Want in? Join us.

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