Oregon’s work in reviewing hospital mergers sets example for other states as consolidation drives cost increases mergers

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In the Press

Katie Gudiksen
Katie GudiksenExecutive Editor

Shane Ersland
November 9, 2023
Katherine Gudiksen, senior health policy researcher at the University of California’s College of Law at San Francisco, cited KFF data that shows healthcare is becoming increasingly unaffordable, as family premiums and worker contributions are increasing much faster than the rate of inflation or wages.The average annual single premium and the average annual family premium each increased by seven percent last year, according to KFF. Comparatively, there was an increase of 5.2 percent in workers’ wages and an inflation increase of 5.8 percent.
“The primary reason for that increase is an increase in prices for the services patients receive,” Gudiksen said.The Health Care Cost Institute analyzed the underlying drivers to spending over the last five years, and over 80 percent of that spending was due to an increase in prices.“So in my mind, the next question is do we get improved quality or good quality for spending this large amount of money? Compared to our peer nations, the answer is a resounding no. Economists and researchers all agree that one of the main drivers of this increased spending is consolidation and market power.” — Gudiksen
Gudiksen said prices frequently increase following a hospital merger.
“The average [increase] is about 20 to 44 percent, (with) some even much higher,” she said. “There’s also evidence that hospitals not involved in the merger also raise their prices, essentially shadow pricing.”
Five health systems operate 539 community hospitals in 43 states, Gudiksen said, which represents more than 10 percent of the country’s hospitals
“And the revenue of these systems grew at about twice the rate of the rest of the market,” she said. “UnitedHealthcare and CVS are two of the 10 largest companies in the US by revenue. UnitedHealthcare is now the largest employer of physicians. And they employ more than 70,000 physicians across the country.”
States can conduct merger reviews—examining transactions as they occur—to protect themselves from harmful mergers, Gudiksen said.
“They protect existing competition, and can prevent anti-competitive behavior and its incipiency,” she said.
Oregon is a leader among other states in conducting merger reviews through the Oregon Health Authority’s (OHA) Health Care Market Oversight (HCMO) program, Gudiksen said. HCMO was launched in March 2020, and it has reviewed several important transactions since then.

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