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New York hospital mergers lead to higher prices, report finds

Hospital mergers in New York typically result in higher prices, with little improvement in quality, according to a new Manhattan Institute report, sponsored by the New York State Health Foundation.

In the report, authors cite a 2012 literature review by health economists Martin Gaynor and Robert Town, which included New York. Two studies cited in the literature review found across geographic markets, hospital consolidation results in higher prices; in concentrated markets, price increases can surpass 20 percent.

The studies also found lower mortality across various conditions for patients in less concentrated hospital markets, according to the report. Specifically, higher HMO penetration was linked to lower mortality from gastrointestinal hemorrhage and congestive heart failure.

Authors of the Manhattan Institute said New York's $12.8 billion Medicaid reform effort, while taking positive steps to reduce costs and deliver benefits, may make the problem worse by allowing consolidating hospitals to duck antitrust rules.

Furthermore, the authors argue that antitrust litigation — because it is infrequently used and does not address existing factors that limit competition in hospital markets — should be only one of several tools deployed by regulators.

The authors said antitrust is, and must remain, a vital tool in New York, but a complementary strategy can be found in addressing core deficiencies in state markets that handicap competition. They said these include lowering barriers to entry for new competitors and business models, as well as encouraging more competition among providers and across geographic regions through value-based purchasing arrangements.

"By effectively merging supply- and demand-side reforms, policymakers can address the root causes of the lack of competition in healthcare markets without micromanaging provider experimentation — and potential consolidation — among providers," the authors wrote.



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