Merger activity among hospitals seems to be increasing in anticipation of the Affordable Health Care Act becoming the law of the land in 2014.
Two decades ago, there were on average about four rival hospital systems of roughly equal size in each metropolitan area, according to research done by Martin S. Gaynor of Carnegie Mellon University and Robert J. Town of the University of Pennsylvania. By 2006, the number of competitors was down to three. Consolidation has continued, in 2002 doctors owned about three in four physician practices. By 2008 more than half were owned by hospitals.
If there is one thing that we all know, it is that limited sources of care drive prices up while quality and innovation suffer. A report by Leemore S. Dafny of Northwestern University found that hospitals raise prices by about 40 percent after the merger of nearby rivals.
The rate of increase in health care spending has slowed. Since 2009 health care spending has been growing less than 4 percent per year, the slowest rate in more than half a century, according to information from the Office of the Actuary at the Centers for Medicare and Medicaid Services. But it is still outpacing inflation by a significant margin, despite a sharp slowdown in the use of medical services.
According to the Health Care Cost Institute, the rising health care spending of Americans under 65 in the last two years has been driven entirely by rising prices; not by more use. From 2009 though 2011 the fee for an outpatient visit to the emergency room rose 17 percent. The price of a routine office visit to a primary care doctor rose 8 percent. The price of radiology services rose 12 percent.
There are provisions of the health care law such as accountable care organizations that lend themselves to limiting competition. “Hospitals want to maintain their revenue streams and enhance their bargaining leverage,” said Professor Gaynor. “This is a way to do so.”