Although various factors such as an aging population have contributed to climbing healthcare costs in recent years, one factor stands out as the main driver of skyrocketing spending in the U.S.: The consolidation of hospitals and physician practices, Suzanne Delbanco, PhD, executive director of the nonprofit Catalyst for Payment Reform, writes in The Wall Street Journal.
Provider consolidation over the past couple of decades — between hospitals and physicians, as well as between hospitals and health systems — has increased payments to hospitals approximately 3 percent nationwide, according to a 2012 CPR report. "That may sound small, but 3 percent of the almost $900 billion the U.S. spends on hospital care each year is a hefty chunk of change," Dr. Delbanco writes.
Some providers have said mergers lead to economies of scale and more efficient, less expensive care. However, Dr. Delbanco writes there is "no evidence to support such claims." A 2012 Robert Wood Johnson Foundation report by Federal Trade Commission's Bureau of Economics Director Martin Gaynor, PhD, and Robert Town, PhD, an associate professor of healthcare management at the University of Pennsylvania Wharton School, found that "physician-hospital consolidation has not led to either improved quality or reduced costs." Additionally, Drs. Gaynor and Town concluded mergers can increase prices by more than 20 percent in already concentrated markets.
Furthermore, Dr. Delbanco argues providers can deliver high-quality coordinated care without merging. She offers the Intensive Outpatient Care Program — which employers have used to coordinate care for workers with complex chronic conditions — as one example. Accountable care organizations also give independent physician practices the chance to improve quality without consolidating, she writes.
"We applaud healthcare providers working hard to improve patient care and to reduce costs and inefficiencies," Dr. Delbanco writes. "At the same time, employers will have to be smart about how they craft their contracts to ensure that the changing provider landscape translates into higher quality, and more affordable, care instead of the opposite."
The increasing rate of consolidation among healthcare providers in recent years has fueled an ongoing debate over whether mergers and acquisitions drive up costs and stifle competition or help hospitals, health systems and physicians take on the challenges of reform. At a Politico briefing last month, Dr. Gaynor said some (although not all) hospital mergers pose a threat to the market-based system that supports the Patient Protection and Affordable Care Act and other reforms, according to a Politico report on the briefing.
On the other side, hospital leaders argued that the PPACA has put pressure on providers to better coordinate care and innovate, driving mergers and acquisitions. Deborah Zastocki — president of Chilton Medical Center in Pompton Plains, N.J., and vice president of CMC's parent company, Atlantic Health System in Morristown, N.J. — said before Chilton Medical merged recently with Atlantic Health, the hospital was struggling to keep up with EHR requirements, for instance.