On November 6, voters consistently identified healthcare as the number one issue they were concerned about. Put a different way: our newly elected leaders will be looking for ways to improve our healthcare system.
Our recommendation: increase transparency and accountability across our nation’s hospitals.
We’ve written about how hospitals are a driving force behind overall healthcare spending by arbitrarily increasing the price of care and medication. However, a recent study in the New York Times indicates an even more concerning and less noticeable trend among our nation’s hospitals which is increasing the cost of care.
The New York Times investigated a trend known as “hospital consolidation,” or when hospitals and hospital systems merge and create larger entities. They found that when hospitals merge “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.”
Put in terms of dollars, the researchers found that from 2012 to 2014, metropolitan areas in which hospitals merged saw price increases of “at least” 25 percent, from $12,000 to $15,000.
What’s worse is that consolidation is increasing nationwide. A separate study from the National Academy of Sciences found that there were 1,412 mergers from 1998 to 215, while there were 102 mergers in 2016 and 115 in 2017, an alarming, growing trend. This study likewise corroborated the New York Times report, finding that “consolidation leads to substantially higher prices.”
This increase is due to a lack of competition amongst hospitals for both federal reimbursements and patients with private insurance, ostensibly increasing their leverage when negotiating with drug manufacturers, pharmacy benefit managers, physicians and physicians groups, nurses and nurses unions and, of course, insurance companies.
For consumers, this means a higher bill.
At the same time, consumers face rising prices and increased premiums and deductibles, meaning that the cost of their care is increasing just as patients are on the hook to pay more.
What’s worse, the National Academy of Science study found that as hospitals merge, they will “negotiate restrictive terms in insurer contracts,” further limiting coverage and forcing greater burdens onto patients.
It’s important to note that hospitals have long leveraged their size and importance to their communities to gain benefits from federal programs. We’ve written about how hospitals continue to profit off of the 340B program, which is intended to promote community care for the most vulnerable, despite no evidence that their participation in the program increases that care.
Likewise, a recent report from the U.S. Department of Health and Human Services’ Office of the Inspector General found that hospitals exaggerated claims to increase reimbursements for graduate medical education (GME) funds from the Center of Medicare and Medicaid Services (CMS), essentially defrauding the government of taxpayer funds.
Hospital consolidation may be overlooked by most consumers but should not be overlooked by the Trump Administration or the incoming Congress. By ensuring that hospital markets remain competitive and by increasing transparency, hospital systems can be held accountable for their wasteful spending or outright fraud.
As we’ve said so many times before, our healthcare system, including and especially hospitals, needs more competition, greater transparency and true accountability to help bring down prices and help patients. Allowing consolidation to continue unchecked is the opposite of this goal.
