Nearly three-quarters of metro areas had highly concentrated hospital markets in 2016 and 13% were very highly-concentrated, according to a new report from the Health Care Cost Institute.
Researchers found metro areas where hospitals markets became more concentrated also had larger increases in inpatient prices and vice-versa. The correlation held true when looking at only areas with merger activity.
Provider market concentration has been a focus for policymakers looking for ways to bring down ever-increasing healthcare costs. Hospitals have been a frequent target of cost-control efforts though the sector has pushed back fiercely, publicizing a recent report intending to highlight the benefits of M&A.
The American Hospital Association said the HCCI report doesn't consider consolidation among insurance companies. Because it "lacks important data and ignores trends in the field in drawing overly broad conclusions, it cannot be considered a credible source on market competition," Aaron Wesolowski, AHA's vice president for policy, analytics and strategy, said in a statement to Healthcare Dive.
Lawmakers, patient advocates and others, however, point to findings such as the recent HCCI research supporting the premise that consolidation leads to less competition, higher prices and fewer choices for care.
The analysis, which looked at 1.8 billion commercial claims for 112 local areas in 43 states, found the number of highly concentrated markets increased from 67% in 2012 to 72% in 2016, with areas including Milwaukee and Houston shifting to less competition. More than two-thirds of areas saw some increase in concentration levels over that time period, according to the study.
Kevin Kennedy, a researcher at HCCI and one of the report's authors, said the results weren't unexpected and echo other research in the area. "It's not really surprising. I think what we did see is how striking it was," he told Healthcare Dive.
The correlation between concentration, competition and prices "adds to a growing concern," he said. State and local policymakers can use the findings as a jumping-off point for considering how M&A is affecting residents.
Kennedy said he hopes policymakers take action on the findings. "It is kind of tough for an individual person to stand up to major hospitals systems gaining concentration all the time, especially if they're in the middle of going through an inpatient admission themselves," he said.
The findings mirror other research in the area.
Indeed, some big-name providers completed acquisitions over the study period, including Dignity Health and Catholic Health Initiatives forming CommonSpirit Health as well as Advocate Health's merger with Aurora Health Care. Hospitals are also rapidly buying up physician practices.
The trend may be slowing, however. A Ponder & Co. report from April found hospital M&A was at its lowest point in a decade in the first quarter of this year.
The report notes, however, that an increase in market concentration can happen for several reasons "such as changes in patient preferences, quality improvements by certain providers, or changes in insurance networks, among other factors."
Another key finding of the report is that metro areas saw a variety of changes in market concentration, pricing and other factors over the four-year study period. "In short, each metro had a different experience," the authors wrote.
Some places such as Memphis, Tennessee, bucked trends. Memphis saw inpatient prices decrease despite having the same growth in concentration as Salt Lake City, the city with the seventh largest concentration increase over time.
The report authors caution the analysis "does not necessarily show that increases in concentration caused increases in prices."
The least concentrated market was New York and the most highly concentrated was Springfield, Missouri. The area that had the largest bump up in concentration was Durham, North Carolina, with Winston-Salem, North Carolina, showing the least change.