I noticed a discussion today on one of my LinkedIn discussion groups, Regional Third Party Administrators. The discussion was from another blog on Payerfusion.com.
The blog stated that hospital spending is the key driver of healthcare costs in the US and has been growing at nearly 5% year over year. One cause of this consistent increase in spending is the continuing consolidation of hospitals around the country.
This increase in consolidation, the blog goes on to say, has given some merged hospital systems oligopoly power to impose fees that are far higher than those found in areas with high market competition. Statistics show that hospital consolidation in highly concentrated markets have driven prices up by as much as 40%.
Because they have increased market power and leverage, hospitals charge private payers higher prices and are more successful in “cost-shifting” as a result of providing underfunded care. Studies show that stand-alone and community hospitals typically receive payments from private payers which are closer to Medicare/Medicaid fees.
Some of the impacts to cost and quality are as follows:
- Increases the price of hospital care.
Increases in price due to hospital consolidation are largely passed onto consumers through higher premiums, higher deductibles/co-pays and even lower wages.
- Reduces quality of care, through decreased market competition.
The focus of hospital consolidation is on reducing competition to increase market bargaining power when dealing with insurers. This reduction in competition also has an impact on quality and patient choice. Consolidated hospital systems may be less motivated to offer innovative, efficient methods and improvements to care quality in order to attract new patients.
- Consolidation hasn’t lead to lower costs or improved quality.
Integration of merged hospitals may lead to enhanced performance through achieving efficiencies, greater coordination and revising processes to unify entities. Consolidation alone only combines multiple entities under one group to increase market power, not necessarily fusing them together for improvement.
What this means to the medical tourism industry, the workers’ compensation industry and to the overall health of the American health care system is this; it will mean a boon for medical tourism, and and a nightmare for the workers’ compensation industry if they don’t consider implementing medical tourism into workers’ compensation and realize real cost savings with better quality of care for their insureds’ injured workers.