After a decade of rapid consolidation in the healthcare industry, researchers are now analyzing the effect of hospital mergers and the results show lower-quality care and higher prices for patients. According to an analysis by The New York Times, hospitals see an increase in both patient mortality rates and “patients with major health setbacks” after merging with another hospital. With one less competitor in the geographic area competing for patients, the higher price for medical care after a merger should not be surprising. However, hospitals and healthcare systems have often rallied public support for their mergers by touting improved patient care as one of the tangible benefits. Given the increased breadth of healthcare offered by larger hospitals and a supposedly synergistic benefit from having a single healthcare provider, hospitals reasoned that larger and more capable hospital systems would lead to better outcomes for their patients.
While touting better care for patients may be an effective tool for helping hospitals receive approval for their merger, the evidence on the subject points in a different direction. Several Medicare studies show hospital competition “results in lower rates of mortality from heart attacks and pneumonia.” A national study on cardiologists measured whether market concentration, or the number of cardiologists competing against each other for patients, effected patient care. The results showed that patients in areas with a “highly concentrated market,” where the majority of cardiologists worked for the same hospital or employer, are more likely to “have heart attacks, visit the emergency department, be readmitted to the hospital or die.” The author notes these increases “are large” – a cardiology practice that increased its market share from 40 percent to 60 percent would see heart attack rates increase by 5 to 7 percent.
According to market analysts, the decrease in patient care at newly-merged hospitals is caused by reduced competition in the healthcare marketplace. Because the price for medical care is generally set by the government or a private insurance provider, hospitals are left to differentiate themselves in the marketplace by the quality of care provided to their patients. For example, a well-insured hospital patient will likely choose the best hospital in the area for her surgery. If there are five hospitals in the area, then each hospital will need to produce better patient outcomes than the other four hospitals. If there is a high market concentration and only two hospitals in the area could perform the surgery, then each hospital will only need to provide better patient care than one other hospital.
While the economics of healthcare may be a morally complex issue, the healthcare industry in the United States seemingly operates in a market-based system – producing the best patient outcomes when competing with other healthcare providers in the area.