In the essay published by the National Institute for Health Care Management, titled Hospital Market Consolidation: Trends and Consequences, Dr. Vogt analyzes data and academic literature related to hospital mergers, starting with what he terms the “consolidation wave” of the 1990s. During that time, 900 inpatient hospital mergers and acquisitions occurred, leaving 90 percent of Americans in metropolitan areas in a highly concentrated hospital market, according to the essay. Since 2003, actions by the FTC and the Department of Justice have greatly reduced these market concentrations, but there is renewed interest in mergers in the current market.
Dr. Vogt said in the essay that hospital prices to private payors rose by 20 percent from 1994-2001 and by 42 percent from 2001-2008. He noted that hospital prices vary greatly due to the types of patients treated and their sources of payment. A recent study of California hospitals reported that hospital prices to private payors fell from $10,800 per discharge in 1992 to $8,500 in 1999. However, prices again soared to $15,600 by 2006 after the impact of tightly managed care subsided.
The essay found prices increasing due to hospital consolidation by as little as 5 percent to as much as 50 percent. However, justification for these increases could be the incentive for hospitals to compete in quality over price, and consolidation may increase patient volume, which has been shown to improve overall quality. However, Dr. Vogt found that the research shows mixed results in the improvement of quality corresponding with consolidation and increase in prices.
The essay also noted that as hospital sizes grow, the average costs fall. The evidence showed this trend for size increases up to 200 beds, and some found scale economies for even larger hospitals. Although cost savings were modest at best, many hospitals saw slow-growth in costs after consolidation, according to the literature.
Read Dr. Vogt’s essay Hospital Market Consolidation: Trends and Consequences (pdf).
