Consolidation in health care
How has the world of hospitals changed lately?
Once unique to each city, town, and neighborhood, hospitals and physician practices have merged and grown more concentrated in recent years. Concentration is an economics term that means that because there are few firms in one area, there is less choice for consumers. In health care, this directly affects patients. In
90% of metropolitan areas had highly concentrated hospital markets
65% had highly concentrated specialist physician markets
39% had highly concentrated primary care physician markets
57% had highly concentrated insurance markets
How has physician employment changed lately?
The number of physicians who are independently employed has decreased, with an increasing number of physicians, especially younger doctors, being employed by a hospital or health care institution.
33% of all physicians identified as independent in 2016, a decrease from
48.5% in 2012.
42% of physicians were employed by hospitals in 2016 (compared to
25% in 2012)
How concentrated is the retail pharmacy industry?
80% of all pharmacies in the United States are owned by the
four largest companies who operate the majority of stores:
Additionally, there is a layer of “middlemen” called pharmaceutical benefit managers, which claim to negotiate to lower prices. The
three companies, listed by percentage of their share of the market, make up 66% of the total market:
Rite Aid Corp.: 4,515 stores
What difference do all these mergers, acquisitions, consolidations and monopolies make on prices in health care?
While competition can improve quality of care,
hospital consolidations are bad for patients. Hospital consolidation is associated with a
6% to 10% rise in price because larger entities have more market power. It’s the same for pharmacies and insurance companies – more power, higher prices, more cash. Whether or not service improves, and CEO and executive salaries go up because their institutions’ budgets are bigger.
Here are some of the most striking examples of the impacts of consolidation.
In counties with lower levels of concentrations, prices for hospital admissions, oncology, and radiology services ranged from
4% to 19% lower than in more concentrated areas.
When private corporations (whether for-profit or technically not-for-profit) expand, they can throw a lot of weight around to achieve their self-interests. Americans need a health care system committed, not to the “bottom line,” but to serving the public interest and working for the common good.
Added facility fees for procedures are often tacked on to outpatient bills when done in a “hospital facility,” which is often a result of hospital systems buying up smaller practices.