The largest health systems, on average, have far less market share than the top three payers in each state, despite concerns from policymakers and the public, according to a report published May 1 by the Association of American Colleges Research and Action Institute.
The study compares the market share of providers and payers to demonstrate the effects of consolidation across these two industries.
Thirteen things to know:
1. Researchers found that the largest systems by total inpatient hospital discharges have, on average, far less market share — a combined 43% of the market share in each state — than the top three large-group insurers, which hold an average of 82% of the market share in each state.
2. North Carolina's largest health systems — Charlotte-based Atrium Health (20.3% of inpatient hospital discharges), Chapel Hill-based UNC Health (14.9%) and Winston-Salem-based Novant Health (14.4%) — have a combined market share of 49.6% in the state, according to the report. However the largest payers — Blue Cross Blue Shield of North Carolina (74.9%), UnitedHealth Group (16.2%) and Cigna Health Group (4.4%) — have a combined 95.5% of the market share.
3. The same goes for Massachusetts, where Somerville-based Mass General Brigham (19.8% of inpatient hospital discharges), Cambridge-based Beth Israel Lahey Health (19.5%) and Dallas-based Steward Health Care (8.3%) — have a combined 47.6% of the market share in the state, researchers found. But the largest payers, those with the highest enrollment, in Massachusetts — Blue Cross Blue Shield of MA (60.7%), Point32Health (23.5%) and UnitedHealth Group (4.2%) — have a combined 88.4% of the market share.
4. Notably, in California, researchers found that Oakland- based Kaiser Permanente dominates the market, as both the health system with the most discharges (13.1%) and the largest payer (51.6%).
5. When a payer's market share far outweighs that of an individual health system — like most states in the analysis — that can drive down the amount that insurers are willing to pay hospitals and health systems for patient care.
6. Another concern among policymakers has been the rising trend of health systems buying up large numbers of hospitals within their states or regions. Despite this consolidation, the analysis found that the largest systems by hospital share account for less than a third (30.2%) of the share of all short-term, acute care, children’s and critical access hospitals, on average across states.
7. For example, in Indiana, the systems with the largest share of total hospitals are St. Louis-based Ascension (13.9%), Indianapolis-based IU Health (11.3%), Mishawaka-based Franciscan Health (8.7%) and Franklin, Tenn.-based Community Health Systems (8.7%). These four systems own 42.6% of all the hospitals in Indiana combined
8. On the other hand, the three largest payers in Indiana — Elevance Health (68.9%), UnitedHealth Group (17.1%) and Physicians Health Plan of Northern Indiana (5.3%) — represent 91.2% of all privately insured patients with insurance from the large-group market.
9. The number of health systems in the U.S. has not changed much in recent years — 626 in 2016, 637 in 2018, and 635 in 2021. However, the number of payers has dropped substantially from 2011 to 2020, decreasing from 640 to 472 large-group market insurers; the individual market saw an even bigger drop from 1,529 payers to 563.
10. Nationally, the distribution of private insurers appears competitive (UnitedHealth Group (14%), Elevance (12%) and Aetna (11%)) but this perspective looks different at the state level with certain companies holding an outsized share of the commercial market, according to the analysis.
11. In Alabama, for example, Blue Cross Blue Shield holds 95.2% of the large-group market. In Louisiana, Louisiana Health Services Group represents 70% of all privately insured patients in the large-group market. And in Oklahoma, Health Care Service Corporation has 73.2% of the large-group market. The latter insurers are both independent licensees of Blue Cross Blue Shield.
12. Increased payer consolidation suggests that focusing on regulating provider consolidation is problematic. Payer consolidation has resulted in lower prices, but the effect on reimbursements to providers is unclear, according to researchers, who argue that there has not been evidence of reduced premiums for patients and that insurer consolidation increases premiums.
13. Payers are also acquiring physician practices at a rate far higher than hospitals and health systems. Private equity firms and physician groups have acquired the largest share of physicians in the last five years (65% and 14% of all physician practice deals, respectively) while payers acquired the thor most (17%) according to the American Hospital Association. Optum now employs more than 10% of all practicing physicians in the country.
Click here for more details on the study and its methodology.