Consolidation has been a growing trend in the healthcare industry since the passing of the Affordable Care Act in 2010. Hospitals have merged into larger medical groups. Physicians have entered larger practices with institutional affiliations. And hospitals acquire physicians from private practices.
From 2016 to 2018 alone, the industry has seen an 11% increase in the number of primary care physicians affiliated with systems. And with the economic crisis and financial restraints the COVID-19 pandemic brought — threatening a sustained decline in revenue among physicians — the trend won’t likely be stopping soon.
Consolidation proposes several benefits to physicians and patients, like reduced medical costs, enhanced efficiency, and improved patient care and accessibility. Those are some advantages providers cite when it comes to healthcare consolidation. However, as with any other business model, market dynamics within the healthcare industry can shift and be complex. This rapid healthcare system consolidation also can bring more harm than good to patients and providers alike.
What Does Consolidation Mean?
Merging, acquisitions, affiliations, and other forms of consolidation are nothing new in other industries. Debates surrounding the effects of consolidation on the labor market and the quality of service have been around for many years.
For example, there has been a growing monopoly over a huge percentage of the beef and pork markets in the US food industry. Only four companies contribute to 85% of the annual beef production. Additionally, as of 2015, the top four “pork powerhouses” alone control 52% of the U.S. pork production.
These companies hold a lot of power to dictate and even limit what choices farmers can make about their products. Consolidation also makes it extremely difficult for new farmers to enter and make breakthroughs in the market.
Similarly, the airline industry also suffers from the same disadvantages consolidation brings. Four major airlines control more than 80% of the American passenger market. There’s less competition and increased prices while having no guarantee of a quality airline experience.
Healthcare Consolidation Means Your Doctor is an Employee
Consolidation has shaped the healthcare industry over the last decade, and independent practice seems like a thing of the past. In the US, only five for-profit insurers have control of 43% of the market. And at least 60% of community hospitals are under a major health system.
If you walk into any healthcare facility, the chances of your physician being an employee under a hospital or a large medical group are relatively high. This trend can be unhealthy for doctors for several reasons. And it can be dangerous for patients, too.
Here are some examples of the negative impacts of healthcare consolidation.
Reduced Quality of Care
Many people state that a critical reason for the recent and rampant healthcare consolidation is the advocacy of a higher quality of care for patients and consumers. However, multiple studies on the effects of hospital mergers report that consolidation might be doing otherwise. In a 2009-2013 study about mergers and acquisitions, consolidation has been attributed to modestly worse patient experiences. And no significant changes in rates of mortality and readmission have been observed.
Because many doctors are likely to be under short-term employment contracts, it’s difficult for strong doctor-patient relationships to be sustained. Long-term relationships with a primary care provider have been linked with improved management of chronic conditions, fewer emergency department visits, and healthier lifestyle choices.
Increased Prices of Healthcare Services
Merging healthcare systems and other forms of consolidation can significantly reduce competition within the industry, leading to increased prices. Because consolidation results in a highly concentrated market, hospitals have the power to negotiate higher prices with insurance providers. And with the current situation of the US healthcare system, more and more families are unable to seek costly medical services.
A 2019 study reported that highly concentrated markets in the healthcare industry are more likely to have insurance premiums 5% more expensive in comparison to those in less concentrated areas. Additionally, hospitals with no direct competition within a 15-mile radius have been found to have health care services that are 12% more expensive than markets with four or more competing hospitals.
These hiked-up prices can discourage patients from seeking timely treatment for illnesses. They may also cause patients to forego medical appointments like wellness checkups which, while not urgent, are still critical to long-term health.
Fewer Healthcare Choices for Patients
Competition is a driving force in the efficiency of many industries. With less competition in the market as more hospitals and companies encourage consolidation, the healthcare system ultimately leaves consumers with significantly fewer choices and less innovative solutions in meeting the needs and preferences of every individual.
With little transparency about how these companies operate, leading providers have plenty of opportunities to engage in practices that can bring them revenue without the guarantee of improved patient care quality. For example, dominant insurers can make decisions on behalf of a physician. They can direct patients toward treatments and medications that ensure the company receives the highest profit margin. Consumers would have to pay more for health insurance premiums and receive less effective drugs or medical treatments.
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