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Researchers: Hospital Deals Weaken Competition

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Hospitals really are teaming up to raise prices for managed care plan patients.[@@]

Alison Evans Cuellar, a researcher at Columbia University, and Paul Gertler, a researcher at the University of California at Berkeley, draw that conclusion in a paper published in the latest edition of Health Affairs.

The researchers found that hospitals that consolidated by joining a health care “system” were more likely to operate in areas with high managed care growth and have high managed care patient loads.

Hospitals in multi-hospital systems had 14% more health maintenance organization and preferred provider organization patients than independent hospitals, and the system hospitals’ HMO/PPO prices were 7.7% higher, the researchers report.

These findings “were consistent with [the system hospitals] having improved their bargaining positions with their plans,” Cuellar and Gertler write.

Although the price increases might be the result of a number of factors, such as improvements in quality, the study results show that the system hospitals also enjoyed a stronger bargaining position, the researchers conclude.

“If hospitals offer an improved product, payers may be willing to pay more for it,” the researchers write. “However, the study found little or no effect of systems on inpatient quality. Consequently, any price changes are likely to reflect gains or losses in market power.”

Federal antitrust regulators have had little luck persuading the courts to block hospital mergers, but the number of hospital deals has been falling because many of the best targets already are part of multi-hospital systems, the researchers write.

“We find that acquisition leads to higher prices despite using a broad market definition, rather than a narrow geographic area, as would likely be used in an antitrust case,” the researchers write. “Furthermore, we find that any commitments hospitals may make in exchange for acquisition approval, such as quality or charity care, appear to be difficult to achieve, at best.”

From an overall policy perspective, the researchers conclude, their findings show that the effects of hospital consolidation on the health care market may need to be re-examined.

“Outside of antitrust enforcement, health policymakers who take a broad view of the health care system are faced with mounting evidence that hospital consolidation has meant more negatives than positives for consumers so far,” the researchers argue.