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Hospital Consolidation, prices and quality

Posted Sep 20 2012 12:00am

An interesting report from the Robert Wood Johnson Foundation summarizes the literature describing the effect of hospital concentration in a market on prices and quality.  The general consensus from the literature is the following:

  • Increases in hospital market concentration lead to increases in the price of hospital care
  • Hospital mergers in concentrated markets generally lead to significant price increases
  • At least for some procedures, hospital concentration reduces quality
  • Hospital competition improves quality under an administered pricing system (e.g., National Health System in England)
  • Competition improves quality where prices are market determined, although the evidence is mixed

A summary of these findings is available here .

Close to my home, a study by Tenn (2011) found that the San Francisco Bay Area merger of Sutter and Summit Healthcare systems lead to price increases (28% to 44%) that were among the largest of any comparable hospital in California.  The authors concluded that the transaction may have been anti-competitive.

The RWJF study also concludes what I have been saying over the past years , the Accountable Care Organizations (ACO) promoted by the Affordable Care Act (ACA) may not improve quality and are likely to increase the price of healthcare.

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