The accelerating rate of consolidation among hospitals and health systems has spurred concern among healthcare economists, antitrust lawyers, employers and consumers over possible price increases for medical services. For decades, evidence substantiating these qualms has been largely anecdotal, but findings from a recent study prove cross-market mergers drive up prices.
Cross-market mergers occur when two hospital systems merge but operate in different markets.
The study, led by Leemore Dafny, PhD, a professor and the director of health enterprise management at Evanston, Ill.-based Northwestern Kellogg School of Management, found cross-market mergers lead to price increases of 6 to 10 percent. The study examined more than 500 mergers between 2000 and 2012, focusing on transactions that involved hospital consolidation in the same state but different local markets.
Despite the significant price increases Dr. Dafny and her colleagues identified, cross-market mergers aren't scrutinized at the state or federal level, according to Marketplace, largely because regulators have historically lacked the empirical evidence needed to challenge these mergers.
Massachusetts Assistant Attorney General Karen Tseng said these new findings will likely have an impact on her office's work. "It's the leading edge," she told Marketplace. "I do think it helps attorney generals' offices refine our thinking and our analytics that drive our monitoring of the healthcare market on behalf of consumers."
However, some economists are worried regulators will use such findings to prevent reasonable mergers from going through.
"These cross-market mergers I can tell you in general, why they may be bad," said Greg Vistnes, PhD, an economist with Charles River Associates. "But I don't think we can say which one is good and which one is bad."