Illustration of multiple hospitals
Doctors, Hospitals & Other Providers Print

Hospital Monopoly a Costly Game for Consumers

The Scoop


Hospital consolidations across the country are limiting competition and causing significant price hikes, and the Federal Trade Commission is saying, “Do not pass Go. Do not collect $200.”


Overview


  • Hospitals merging to meet healthcare reform goals
  • Reduced competition means higher prices for consumers
  • FTC boosting efforts to block hospital consolidations


The Details


It’s no secret that U.S. healthcare is among the most expensive in the world, and hospital consolidations could be adding to the problem. As hospitals join forces and stifle competition, prices go up, and there are fewer and fewer players in the market to keep costs in check.


In areas where hospital networks have achieved a monopoly, prices are generally 15% higher than those with at least four competitors in their area, according to a study published by the Bureau of Economic Research. This can add an average of $2,000 more to the bill for each hospital admission, reports the Federal Trade Commission (FTC). Even among hospitals with two or three competitors, prices tend to be higher — about 6% and 5%, respectively.1  


The FTC has been stepping up its efforts to block hospital mergers. According to FTC chairwoman Edith Ramirez, the number of hospital consolidations in 2015 was 18% higher than in 2014 and up 70% since 2010. 


But hospitals aren’t the only ones merging. Physician groups are being bought out by hospitals or consolidating with other independent practices. Outside the provider sphere, insurance conglomerates, like Aetna and Humana, are making plans to join forces. And last year, CVS acquired all of Target’s 1,672 pharmacies. 


These are all a cause for concern when it comes to controlling healthcare costs. Hospitals say their consolidation efforts are a necessary step in shifting to the more coordinated, value-based system that has been the thrust of healthcare reform. While that may be true in part, a lack of competition is a surefire way to drive prices up, leaving consumers to bear the added financial burden.