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Jan
12

Hospital Cost Drivers

Consolidation in geographic areas appears to increase hospital costs, without any apparent impact on quality. The latest issue of Health Affairs includes a report on an analysis that proves what many have thought for some time – the growth of health systems (as they acquire or eliminate independent hospitals) is associated with higher costs.
Note the wording – “is associated with”, not “results in”. Not that I’m trying to be circumspect, far from it – but the study stops short of proving a definitive linkage between consolidation and increased cost.
However, the study does conclude with the statement, “This analysis suggests that consumers were worse off as a result of hospital consolidations.”
The pace of consolidation has slowed, from over 300 hospitals merged or acuired in in 1997, to just over 100 in 2002. Thus, the consolidation wave may have peaked. That does not mean the impact has; oligopolies tend to test their pricing power carefully; the increased cost noted in the article may not be the final word.
One point that goes unmentioned – in all the rhetoric surrounding the typical hospital merger/acquisition, you always hear about how joint purchasing, contracting, and integration of IT and administration is going to save money.
When? and for whom?


One thought on “Hospital Cost Drivers”

  1. I believe that one of the significant reasons that hospital mergers, consolidations and acquisitions have slowed is that after all of the mergers, consolidations and acquisitions there are far fewer hospitals left to merge with, consolidate with or acquire.

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Joe Paduda is the principal of Health Strategy Associates

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