Consolidation of Health Care Could Lower Costs
Increased consolidation among health plans nationally could benefit consumers by lowering hospital prices, in the regions where health plans are the most consolidated. This finding was recently published in a new RAND Corporation study.
Researchers who worked on the study found that hospital prices were about 12% lower in the metropolitan areas with the fewest health plans, lending support to the view that when health plans become bigger, they can negotiate lower prices from health care providers.
The study was published in the September issue of the journal Health Affairs. It also discovered that regions where hospital ownership is more consolidated generally have higher hospital prices. The prices can be driven lower when health plans are also consolidated.
According to Glenn A. Melnick, an economist at RAND and Blue Cross of California, “There may be a benefit for consumers when health insurance plans are more consolidated because it tends to drive down hospital costs. As long as there is enough competition to keep health plans honest, the consolidation has a good result on prices.”
Hospital workers and doctors have expressed concern over the past few years that ongoing consolidations could depress prices as they concentrate on so much market power.
Researchers examined various data and information about health plans, hospitals and health costs in metropolitan areas across the United States in 2001 and 2004 to determine the market concentration in health plans and hospitals. The study didn’t look at fees charged by health plans.
The study discovered that 64% of hospitals operate in markets where health plans are not very consolidated, and 7% were in the most concentrated health plan markets. More research was to be done in the study to determine more factors.
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