Hospital consolidation is driving up public exchange bills in mostly urban areas and could jeopardize quality of care, cautions a recent analysis by America’s Health Insurance Plans. Of the 12 states examined, significant correlations between this key trend and higher costs were found among enrollees in both federally facilitated and state-based exchanges in Missouri, Georgia and Ohio.

“If hospital systems are able to use monopoly power to extract price increases for their services due to a lack of competition, it will have a substantial impact on consumers, government budgets and taxpayers,” according to AHIP.

However, payment incentives under the Affordable Care Act are seen as accelerating positive changes in the private sector as exchanges and Medicaid expansion continue to broaden access to coverage.

“Alternative payment and delivery models reward value and quality over the volume of procedures and are upending traditional staffing priorities, care coordination pathways and business structures,” AHIP noted.

Meanwhile, the report suggested evidence is mounting that hospital consolidation is driven more by strategies to increase market share as opposed to operational efficiencies. It cited a 2014 study showing higher hospital prices and expenditures incurred by payers of 4% and more than 6%, respectively, despite a negligible change in patient volume. AHIP highlighted similar findings from last year suggesting 10% to 20% higher per-patient costs per year, or $1,200 to $1,700 extra, when hospitals acquired physician practices and medical groups.

The report also emphasized significantly greater costs in Missouri’s highly consolidated markets where costs were 31% to 46% more per year than in competitive areas, while Georgia insurance premiums were 35% to 52% higher in consolidated areas.  Rounding out the top three of those dozen states studied was Ohio, where public exchange enrollees in a less competitive hospital market paid 9% to 13% more for their premiums each year. 

Another area of concern is the potential impact of hospital consolidation on quality of care, though AHIP only cited research conducted years before the ACA was signed into law. A 2005 analysis, for example, tied higher mortality for heart failure and acute myocardial infarction to hospital mergers, while a 2003 study found that patients undergoing angioplasty had better survival rates at hospitals in more competitive areas. AHIP noted that studying the effect of hospital consolidation on quality is “an ongoing area of scientific inquiry.”

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