Report: Nearly 3 in 4 health care markets “highly concentrated”

Written on Sep 18, 2019

The top-line finding of the Health Care Cost Institute's latest report won't surprise anyone who's been paying attention to the industry in recent years: markets are increasingly consolidated.

The number of metro areas that were either highly or very highly concentrated increased to 81 in 2016, from 75 in 2012, out of the 112 markets studied, according to the HCCI Healthy Marketplace Index (HMI) report released Tuesday. That means nearly three-quarters of U.S. healthcare markets are highly concentrated.

The report points to Milwaukee, Wisconsin and Houston, Texas, as examples of the consolidation trend. Those two markets were highly concentrated in 2016 after being moderately concentrated in 2012. But the increases in concentration levels were widespread.

The report goes further than that top-line finding and suggests that rising consolidation may be related to higher prices. As healthcare leaders and policymakers alike look for ways to tamp down the cost of care, the report points to a growing body of literature that documents a relationship between market concentration and heightened prices.

The report found a "slightly positive correlation" between market concentration changes and inpatient price index changes overall. But some metro areas bucked the pattern, such as Memphis, Tennessee, where prices decreased slightly as concentration increased."

Although consistent with previous literature, our analysis does not necessarily show that increases in concentration caused increases in prices," the HCCI report states. "Changes in both measures could be due to many factors other than market consolidation which are related to both concentration and prices."

That caveat will likely be key for the American Hospital Association and others who claim hospital mergers and acquisitions have benefitted patients.

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