Will Hospital M&A Activity Increase Costs for Patients and Employers?

America’s Health Insurance Plans (AHIP), the trade association that represents over 1,300 health insurance companies, made newsworthy comments last week on the relationship between hospital M&A activity and rising costs for patients and employers.

AHIP Vice President of Communications, Brendan Buck, is quoted in a September 12 article published in the Chicago Sun-Times, saying, “Bigger hospitals really only mean bigger bills for patients,” and “consolidation promises greater efficiency, but all that ever materializes is greater costs.”

The comments were spurred by a proposed merger in the Chicago area between Advocate Health Care and NorthShore University HealthSystem. The combined entity would result in forming the 11th largest tax-exempt hospital operator in the country.

According to the Sun-Times article, insurers are becoming “outspoken critics of the hospital merger wave,” and with the increase in M&A activity insurers “see providers of medical care battling back against value-based care.”

The issues are plain to see: bigger hospitals have greater leverage when negotiating with insurers and employers; at the same time, larger hospitals can limit the choices available to patients, which can also increase out-of-pocket costs for healthcare consumers.

Also, the Chicago-area business community views the proposed merger as a negative development because reduced competition will “negatively impact prices.”

But, what does the data say? Two studies, one by the National Institute for Health Care Management, University of California, Berkeley (2011), and another published by the Robert Wood Johnson Foundation (2012), found that less competition and hospital consolidation resulted in higher prices.

For more information on those studies and related information, see the article in the Chicago Sun-Times at: http://politics.suntimes.com/article/chicago/hospital-mergers-may-lead-higher-prices/fri-09122014-1055pm