Recently, researchers at Northwestern University’s Kellogg School of Management found that prices climbed as more mergers and acquisitions have occurred in the U.S. healthcare sector. In this study, researchers analyzed 12 percent of the population’s health insurance data, finding that from 2007 to 2013 nearly 10 percent of physician practices were acquired by a hospital or chain. Once they’d been acquired, the physicians’ prices for services increased by an average of 14 percent.
One might have thought a consolidation of purchasing power would lower overall costs, such as when a huge hospital buys out a doctor’s office or a group practice. However, their research showed this is not so.
How much of these costs are passed on to consumers? Much of these costs are paid by insurance, but the consumer also pays. Medicare, for example, used to reimburse one price to independent doctors and another to doctors who worked for hospitals — even when performing the exact same service in the same location. One study revealed hospital-employed physicians cost the Medicare program $2.7 billion more than their independent peers for four specific procedures from 2012 to 2015. Then these costs were passed on to the patients, as Medicare patients owed $411 million more for those procedures.
But this has now changed, at least in Medicare. As of January of 2017, Medicare does not reimburse differently for hospital-owned versus independent practices. The GAO estimated that this new “Site-Neutral Reimbursement” as it is called, will save Medicare $1 to $2 billion per year.
It does not appear however, that the change in Medicare reimbursement necessarily affects private insurance reimbursement. Private insurance still pays much more for testing and lab work in a hospital versus an independent practice.
One sticker shock event concerned a woman who went for blood work at her doctor’s office in May of 2014, costing her $78.20 out of pocket. However, after the physician’s practice was purchased by a hospital, six months later the same lab work cost her $525.51.
Are hospital conglomerates creating health care monopolies? What happened to free markets and supply and demand in health care? In another study by the Northwestern University researchers, while there was considerable consolidation taking place, they found that the mergers were not drawing the attention of antitrust regulators. This is most likely due to the piecemeal nature of individual acquisition deals. It is only after multiple deals are done that the impact on pricing is felt – and by then, regulators are unlikely to step in.
