Market Consolidation Sends Prices Up, But Simple Solutions Are Elusive
August 19, 2020
This month, Health Affairs published the deliberations of its Council on Health Care Spending and Value on the topic of provider market consolidation as a driver of price. It’s a timely topic: COVID-19-related disruptions are driving even more hospital mergers and acquisitions of group practices. That should set off alarm bells, according to the Council: the data are clear that increased consolidation increases prices, and the Health Affairs review of the Council discussion provides an invaluable reading list of the research undergirding that conclusion.
But naming the problem is only the first step. The group noted the difficulty of untangling the potential for cost-savings around consolidation – from more integrated care or efficiencies – as well as the lack of evidence for that benefit. The Council also provided an overview of the difficulty of solutions, settling on the need to increase post-merger regulation but acknowledging that the tools to do so may not exist.
Why It matters: It can be stubbornly hard to find interventions that drive down health costs without tradeoffs (indeed, that is the subtext of most issues of this newsletter). But some forces that drive costs in the other direction – including market consolidation – may have a better evidence base. The Council’s most important recommendation, then, may be the group’s call to refine our understanding of the phenomenon by using pandemic-spurred consolidation as a research laboratory. By carefully assessing these acquisitions, we can better understand consolidation’s ill effects and whether there are approaches that ameliorate them.