- California’s two biggest hospital chains - Dignity Health and Sutter Health - used their market power to raise their prices more than 20% higher than those of other hospitals in the state, which is a gap of about $4,000 dollars per patient admission, according to a recent study.
- Since the 1990s, a greater number of healthcare providers in the United States have moved toward integrated delivery systems involving one or several hospitals with physicians across multiple specialties - a strategy which research shows has mixed results but empirically has raised patient admission prices, The New York Times reports.
- To combat price increases at hospitals chains policymakers should consider limiting “all-or-none” negotiating tactics as they force stakeholders to accept all of a health system’s hospitals, clinics, and physician groups at the risk of losing access to them all, the study authors recommended.
California has been leading the trend in hospital consolidation nationwide. Now, as healthcare providers in other states are considering mergers, researchers are pointing toward evidence from California as a warning that hospital chains can lead to higher healthcare costs.
There still lacks a consensus within the debate on the effects of integrated delivery systems. Advocates argue that they reduce duplication and avoid unnecessary services, effectively lowering costs. However, other evidence dating back to the '90s suggests that IDS don't improve patient care or keep costs down at all and actually lead to price increases of up to 20%, according to the Times report.
In fact, research demonstrates that between 2004 and 2013, the amount paid by insurance company Blue Cross Blue Shield to the 60 hospitals owned by Dignity and Sutter increased by 113%, while the amount paid to about 175 other California hospitals only rose by 70%, reports Kaiser Health News.
The increase in rates has been accredited to the ability of consolidated hospital chains to control market share. Yet Dignity and Sutter deny the idea that they can dictate rates and claim that they face a great deal of competition. Sutter currently faces a lawsuit and an investigation by state Attorney General Kamala Harris for potentially harming consumers, with Dignity and other large groups also subject to Harris' claim.
Researchers in the study conclude that policymakers ought to regulate mergers to ensure that they don't take advantage of increased market power, which can often lead to reduced price competition and higher costs for consumers.