How Hospital Mergers have dramatically changed healthcare in America

There has been a major wave of consolidation in the healthcare space over the last 15 years.  Today, just over 50% of physicians nationally are now employed by a hospital.  Hospitals continue to buy up primary-care practices, ambulatory surgery centers, and imaging centers as this trend continues. 

Hospitals point to increased integration between care providers as a key benefit arising out of a large integrated healthcare system.  They point to cost savings that can be had when more providers serve under one roof.

However, the data shows only one clear outcome from hospital mergers—dramatically increased prices for employers and patients.  As most know by now, costs for identical medical services can vary widely between two providers.  No rule can be followed to decipher the reasoning for this variation.  Countless articles have been written about how a knee surgery at a top hospital can cost $10,000 while that identical surgery performed two miles down the road can cost $50,000. Worse yet, that surgery with the same physician can cost 2-3 times as much if performed at a hospital versus an Ambulatory Surgery Center (ASC).

Pricing for medical services depends largely on how much leverage you have over the payor.  The payor may be Medicare, Medicaid, or a private insurer.  Hospitals have the least leverage over Medicare and Medicaid and that is why they receive vastly lower reimbursements from these payors as compared to private insurers.  Private insurers, such as United, Cigna, Blue Cross, and Aetna, often have to have all the major hospitals in a given metro in their network to compete.  And due to consolidation of hospitals, that typically means 2-3 hospitals.  These hospitals understand this requirement.  As a result, the hospitals can ‘name their price’. 

The insurance carrier simply passes these rates onto employers and employees, who become the ultimate loser.  So, what can employers and employees do to fight back?  Employers create and pay for healthcare plans, making them the ‘customer’.  In order to address the spiraling cost of healthcare, employers must take back control of their plans from the insurance carriers that have outsourced this role to.  Often in the past, the opacity of healthcare and difficulty in customizing plans can squelch any plan innovations. 

We have developed a portal that makes it easy for you to create a customized plan in a simplified fashion.  Click here to learn more.