Nonprofit hospitals' monopoly drives prices higher in Indiana, study suggests

Households in the most concentrated healthcare markets in Indiana pay more than double the price per procedure compared with those in markets that face the most competition, according to a study from Ball State University's Center for Business and Economic Research.

Indiana's markets for healthcare services exhibit broad signs of monopolization, and the lack of competition in some markets, including Fort Wayne, South Bend and Evansville, is pushing healthcare prices higher, according to the study.

The study showed 85 percent of Indiana's nonprofit hospitals recorded higher profits — or what the hospitals refer to as excess revenue over expenses — than the national average for hospitals of all types. The nonprofit hospitals in the most concentrated markets in Indiana averaged profits of $82 million in 2015, while profits in the least concentrated markets averaged $2.3 million, according to the study.

"We conclude that evidence strongly suggests healthcare markets in Indiana experience significant monopoly power, which has increased prices, allowed not-for-profit providers to accrue stunningly large profits, increased the burden on Hoosier families and likely reduced healthcare outcomes across the state," wrote Michael J. Hicks, PhD, the study's lead author.  

Dr. Hicks makes several recommendations to restore healthcare competition, including strengthening antitrust enforcement and taxing nonprofit hospitals that earn profits at rates consistent with for-profit hospitals.

The study has some limitations, including a lack of sufficient data to conduct a full test across all inpatient services and limited sub-state data on personal consumption expenditures.

The Indiana Hospital Association took issue with the study, saying it uses "misleading information" to support "outrageous conclusions."

Some of the "blatant inaccuracies" are due to the study relying on hospitals' Form 990s, which can be inaccurate, IHA President Brian Tabor wrote in an opinion piece published by the Star Press. He said the study should have relied on audited financial statements.

Mr. Tabor also noted that the study failed to acknowledge the roughly $2.5 billion in financial assistance, training and other community benefits the nonprofit hospitals provide each year.

"It is tempting to rely on market concentration to determine competitiveness as the author suggests, but this simple analysis does not consider nearly enough factors," Mr. Tabor said.

Dr. Hicks isn't the only one drawing attention to hospital prices in Indiana. Earlier this year, Gloria Sachdev, PharmD, president and CEO of Employers' Forum of Indiana, a coalition aimed at improving the value employers and patients receive for their healthcare expenditures, argued hospital prices are pushing healthcare costs higher. She said Indiana's high healthcare costs may be deterring new businesses from the state, according to the Indy Star

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