- As the healthcare industry continues to consolidate, greater regulatory scrutiny is needed to detect anticompetitive behaviors and protect consumers and employers from high prices and premiums, according to a new analysis by The Commonwealth Fund.
- To show how market concentration varies across the U.S., the researchers looked at concentration of providers and payers for each metropolitan statistical area in 2016. Markets were classified as unconcentrated, moderately concentrated, highly concentrated or super concentrated.
- For providers, 47.1% of MSAs were highly concentrated and 43% were super concentrated. By contrast, 54.5% of MSAs had highly concentrated insurance markets, while 36.9% were moderately concentrated.
Overall, provider concentration was greater than that of insurers in 58.4% of MSAs. Payers had the edge in just 5.8% of the studied areas.
Concentrated markets are bad for payers and patients. Yet even when payers have more negotiating power, they don’t always pass the savings along to their members. Regulators need to take steps to ensure consumers reap some of the benefits of consolidation.
The need for scrutiny will only increase as M&A activity continues to ramp up in the industry. Some research has shown mergers can drive up prices for patients, leading lawmakers to keep a close eye on deals in their area. In Massachusetts, the attorney general has raised skepticism of the proposed merger between Beth Israel Deaconess Medical Center and Lahey Health.
According to a recent analysis of healthcare M&A’s impact in California, high concentration in some markets is pushing up prices for hospitals, physician services and Affordable Care Act premiums.
In northern California, where concentration is more prevalent, inpatient prices and outpatient prices were 70% higher and between 17% and 55% higher, respectively, compared with less-concentrated southern California. ACA premiums were 35% higher in the north than in the south. The authors urged state and local regulators and lawmakers to take action.
The new findings have similar policy implications. More regulatory scrutiny is needed at both the state and federal level, the researchers say, noting regulators can use the information to determine whether new consumer protection policies are needed.
For example, more populous MSAs may exhibit lower concentration levels because the effect is spread over more than one market. If markets are highly or super concentrated, there may be other competitive factors that can ease potentially negative effects. “These might include whether it is easy for competitors to enter a market or if there are economies of scale that might lead to lower costs,” the study says.
The researchers note that larger, more integrated and financially robust providers could potentially introduce changes in diagnosis and treatment that improve quality while reducing costs.