Hospital, provider and insurer market mergers have resulted in payers having more bargaining power to reduce provider prices in highly concentrated markets, according to a new Health Affairs report.
The report found hospital admission prices were 5% lower in highly consolidated provider and insurer markets compared to those that are not as dense.
The researchers also found savings for cardiologist visits (4%), radiologists (7%) and hematologist/oncologist visits (19%) in highly concentrated markets.
The University of California, Berkeley study authors said the increasing number of consolidated markets means “the standard competitive model now has little relevance” in a significant part of the healthcare system.
They found highly concentrated markets led to lower prices for most services, but not for visits to primary care physicians and orthopedists. Though there are lower prices, the savings haven’t resulted in lower premiums for individuals, but instead went to profits within the healthcare industry, they said.
Healthcare mergers for both payers and hospitals have become more common, leading experts and state officials to become concerned about what greater consolidation will mean for costs and access to care. Proposed payer mergers involving Anthem-Cigna and Aetna-Humana failed this year, but overall, the move within healthcare is more mergers and consolidation as organizations look for scale.
One of the broader concerns with these megamergers and the general trend of consolidation is that a payer could corner a market and push providers to accept lower reimbursements. This study may feed those fears, particularly with cost savings going toward payer profit and not lower spending for consumers.
The authors said there were 1,412 U.S. hospitals mergers between 1998 and 2015, and 40% of them came after 2009. To study the effects of healthcare market consolidation, researchers used commercial claims from a national database of 50 million insured individuals to analyze hospital admission and physician visit prices from 2010-14. They examined data for primary care physicians, cardiologists, hematologists/oncologists, orthopedists, and radiologists to compute measures of market concentration.
“The policy dilemma that arises from our findings is that there are no insurer market mechanisms that will pass a portion of these price reductions on to consumers in the form of lower premiums. Large purchasers of health insurance such as state and federal governments, as well as the use of regulatory approaches, could provide a solution.”
There is a difference between a relatively concentrated market and one that is dominated by a small number of major players. The latter type may be the most likely future in some areas, as large-scale mergers are the trend within the trend when it comes to consolidation.
A recent report by Kaufman, Hall & Associates, LLC found that hospital and health systems mergers and acquisitions increased 15% in 2Q. There were six transactions of health systems with nearly $1 billion or more in revenues announced in the first half of 2017. There were only four in all of 2016.
In a separate report, PwC’s Deals Insights recently said there were more than 200 deals involving the U.S. health services industry in 2Q. Though the deal volume was 15% lower than the second quarter of last year, megadeals between healthcare organizations increased.