The Perils of Hospital Consolidation

The Obama administration has touted the ACA as a reform that not only extends coverage to millions of Americans, but also reduces the long-term cost of care. Yet if one looks under the hood of our health-care system, the big cost driver isn’t a lack of access to preventive care. Rather, hospital care, which comprises about a third of national health-care spending, is the single biggest line item in the nation’s health-care bill. The consensus of economists is that hospital consolidation (particularly the acquisition of competing facilities) is harmful — almost always raising costs and rarely improving quality. Hospital consolidation has few positive effects and many harmful ones. Injecting competition into the market, once it’s gone, is difficult. But a variety of reforms at the state level can help minimize the negative effects that market power has on patients and payers. These should be imperative for policymakers who want to make the health-care system more affordable, effective, and patient-centered.

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