Publication
“Addressing Health Care Market Consolidation and High Prices: The Role of the States”
This decade has seen an unprecedented increase in hospital merger and acquisition activity resulting in highly concentrated hospital markets throughout most of the country. Largely as a result of the lack of competition among hospitals and alternative health delivery channels, the payment rates that providers negotiate with commercial insurers has risen steadily, now at alarming rates.
In the late 1990s, commercial rates for inpatient services were 110 percent of Medicare payment rates. In the most recent study, conducted in 2017, the commercial rates for inpatient care in a sample of 25 states had reached 204 percent of Medicare, while the composite rate for both inpatient and outpatient care had risen to 241 percent. Health services research has documented that high prices have become the dominant reason the US spends nearly two times more on health care services than most countries in the Organisation for Economic Co-operation and Development. In this decade, service use has been flat, yet health care expenditures have risen because of provider prices.
The response from the federal government has been tepid at best. Over 90 percent of hospital markets have become highly concentrated. In the meantime, hospital acquisition of physician practices, or “vertical mergers,” and development of multihospital health care systems crossing many local health care markets, or “cross-market mergers,” proceed unchallenged, despite evidence that both are associated with substantial price increases, without evidence of quality improvement or greater efficiency. The Trump administration recently finalized new rules to make negotiated prices more transparent to the public, and pending legislation in the House and Senate would address some of the drivers of health care prices, including anticompetitive contract clauses and a lack of price transparency, but these initiatives remain in nascent stages. Prospects for federal leadership to address consolidation and high prices remain uncertain.
Accordingly, states have adopted numerous initiatives to address failed competition and high health care prices in provider markets. In this report, we explore a wide range of policy options that attempt to introduce needed competition in provider markets and regulate prices directly. We argue that transparency initiatives will support both regulatory and competition-based policy options, and certain approaches to regulation complement and support efforts to improve market competition. Thus, although we largely divide the report in to two parts, competition and regulation, states do not have to select one course or the other but can take action in both areas.
Download the report here.
Source Sightings
As Hospitals Grow, So Does Your Bill
New evidence on the impacts of cross-market hospital mergers on commercial prices and measures of quality
Pharma Litigation Threatens to Limit State Drug Pricing Policy
Models for Enhanced Health Care Market Oversight
How Will Draft Merger Guidelines Impact Health Care Markets?