The arguments in favor of consolidation and vertical integration were that it would lower prices. Economists find the opposite – consolidation, mergers and acquisitions of other local providers has led to higher prices, sometimes much higher:
Peer-reviewed economic research failed to find significant cost savings. Quite the opposite occurred. Hospital mergers and physician-practice acquisitions led to immediate price increases averaging 10% or more above industry trends, with further price increases over time. Evidence on quality was inconclusive at best.T
o this day, the data are not friendly to megaproviders. One prominent study found that rising provider prices are the biggest contributor to rising health spending, especially in concentrated markets.
I live in a County with a monopoly hospital system. One provider runs 4 hospitals, plus various labs and clinics. There are no other hospitals. The hospital behaves as a monopolist – including balance billing. That is, accepting a negotiated discount payment from the patient, and then billing the entire remainder of the bill to the patient. In some situations (including one we are paying off over 18 months), the patient was billed for several times more than the negotiated accepted payment. The only difference between organized crime and hospitals is that organized crime is better organized.
The conventional wisdom is that competition cannot work in health care, since in an emergency, who can compare prices? The problem with that is that only about 2% of expenses go to the ER, and even when generously including Urgent Care clinics and same day “urgent” appointments, you get up to about 10-12%. Most of the large expense items are scheduled in advance – and are not spur of the moment.
The other proposed solution, as done in other countries, is the government runs health care and the government sets the pay scales of those in the industry.
