A Mountain of Evidence Against Hospital Consolidation

There is a growing body of evidence that hospital mergers lead to higher prices for consumers, employers, insurance, and government.  It is vital to educate patients, their communities, and our lawmakers as to how hospital consolidations raise costs, decrease access, eliminate jobs, and reduce the quality of healthcare. 

A study published by the National Bureau of Economic Research and Zack Cooper at Yale University sheds light on the real cost of reduced hospital competition: prices are 15.3 percent higher in markets with one hospital as compared to markets with four or more hospitals, a cost differential of $2000 per admission. “I have never seen a study that says consolidation makes things better,” says Cooper. Neither have I, despite researching this topic extensively.  Hospital consolidation increases costs and does nothing to improve healthcare quality. 

The ACA created incentives for health care facilities to coordinate under accountable care organizations (ACOs); this hindered the ability of regulators to block hospital mergers.  As a result, across America, we have seen a dramatic increase in hospitals gobbling up independent providers and becoming powerful regional monopolies, cautionary tales which should be used to guide local decision makers.  Since the Affordable Care Act went into effect the rate of hospital consolidation has increased by 70 percent. 

Harrison Medical Center is the hospital in which I was born, raised (following my father on rounds to the nursery as a child), and practiced medicine as a new community physician.  Since CHI “acquired” Harrison, they have bought local independent medical practices at a rapid pace. Recently, the largest independent multispecialty physician group in the county, the Doctors Clinic, merged with CHI, as did the last independent orthopedic group. 

Prior to these mergers, 65% of physicians in Kitsap County were independent.  That number has plummeted to a mere 27%.  Kitsap County is losing choice for the consumer, employer, and physicians, which will ultimately reduce access to care. 

Physician groups merging with CHI Franciscan are restricted from utilizing the local ambulatory surgery center (ASC) for outpatient procedures; they are encouraged to use hospital facilities instead.  It is well accepted costs at hospital facilities are substantially higher when compared to identical procedures completed at ASCs. Much of that difference is accounted for by the “facility fee” (room rental charge at hospital-based clinics and operating rooms.) 

A recent study conducted by Leemore Dafny (Northwestern), Kate Ho (Columbia), and Robin Lee (Harvard) provides solid evidence that prices increase when hospitals consolidate.  “If you are [consolidating] because you think in the long run it will serve your community well, you should think twice,” said Dafny, a health and hospital expert at Northwestern University.   

The case for hospital consolidation is strongly supported by the American Hospital Association, the leading industry trade group, which spent $15 million on lobbying in 2015.  They want you to ignore the fact increasing competition among hospitals is a scientifically proven cost-control measure.  The AHA contradicted data published by both Zack Cooper and Leemore Dafny by suggesting access and quality improve in a monopolistic system, yet they have no solid research to back up their assertions. 

The bottom line is studies have shown cities with higher premiums on the ACA insurance exchanges tend to be in cities with the higher priced hospitals.  Higher prices in less competitive markets lead to higher premiums, increased costs of which are passed on to employers, followed by higher out-of-pocket payment demands for individuals and families who have high-deductible health insurance plans.    Additionally, when hospitals consolidate into monopolies, they leverage their advantageous market position to negotiate more aggressively with insurers and employers.  This drives costs up by as much as 15-20%. Are we prepared to levy this substantial increase onto the backs of Kitsap County citizens?

Avvik Roy, a journalist and health policy analyst, gave a presentation on “How Hospital Mergers Increase Health Costs” in 2012.  He concluded that communities and government must do more to fight consolidation among hospitals.  He is right. As an independent physician in private practice, I care a great deal about our people, our patients, and healthcare delivery in Kitsap County.  The fact hospital consolidations do not economically benefit patients is backed by a mountain of scientific evidence.  While those in charge may decide merging is ultimately the best course of action, it will be imperative we stand up as a unified community and hold CHI accountable for ensuring the cost savings they have promised materialize.