The Urge to Merge: Why Health Care Costs Are Still Rising

Back in March of last year, I wrote a piece about the consolidation of US hospitals leading to higher costs and the reduction of quality.

In that article, I provided the reader with a chart of the changes in hospital consolidation in the US by region, and referred to an article on that stated that hospital spending is the key driver of healthcare costs in the US and has been growing at nearly 5% year over year.

In today’s Wall Street Journal, Suzanne Delbanco, executive director of Catalyst for Payment Reform, wrote an Opinion article further expounding on the issue of hospital consolidation and its impact on health care costs.

According to Dr. Delbanco, nationwide, payments to hospitals on behalf of the privately insured are an estimated 3% higher as a result of consolidation, according to a report by her organization.

She states that in some cases, hospitals have increased their prices by nearly 50% after a merger, and mentioned that when two San Francisco area hospitals merged, their prices increased 28%-44%, according to an analysis by an FTC economist.

For employers, who pay about 60% of the total cost of an employee’s health care, this meant that they were burdened with higher costs, as well as consumers, who also saw their portion of the bill go up.

As long as there is an urge to merge, as long as hospitals and hospital systems consolidate, health care costs for privately insured individuals, insurance companies, employers, and consumers will continue to rise.

For the purpose of this blog, employers who must deal with group health insurance costs, as well as workers’ comp costs, need to decide if they are going to continue to be played as fools and allow hospitals to get away with ever increasing costs. That brings to mind the line in the original Star Wars movie, where Obi-Wan says to Han Solo: “Who’s the more foolish? The fool, or the fool who follows him?”

It does not have to be that way. There are alternatives to high cost medical care, and you would be foolish not to look into them.

This entry was posted in Consolidation, Health Care, Health Care Costs, Health Insurance, Hospitals, Medical Tourism, Medical Travel, Workers' Comp, Workers' Compensation and tagged , , , , , , , on by .

About Transforming Workers' Comp

Have worked in the Insurance and Risk Management industry for more than thirty years in New York, Florida and Texas in the Claims and Risk Management spheres, primarily in Workers’ Compensation Claims, Auto No-Fault and Property & Casualty Claims Administration and Claims Management. Have experience in Risk and Insurance Business Analysis, Risk Management Information Systems, and Insurance Data Processing and Data Management. Received my Master’s in Health Administration (MHA) degree from Florida Atlantic University in Boca Raton, Florida in December 2011. Received my Master of Arts (MA) degree in American History from New York University, and received my Bachelor of Arts (BA) degree in Liberal Arts (Political Science/History/Social Sciences) from SUNY Brockport. I have studied World History, Global Politics, and have a strong interest in the future of human civilization in all aspects; economic, political and social. I am looking for new opportunities that will utilize my previous experience and MHA degree. I am available for speaking engagements and am willing to travel. LinkedIn Profile: Resume:

One thought on “The Urge to Merge: Why Health Care Costs Are Still Rising

  1. Tony Barber

    Payers have failed to manage healthcare expenditures, having overvalued the build of their hospital networks and less on the quality and numbers of physicians. This was the case well before hospitals aggressively acquired physicians; which has the affect of further compromising payer strength in the process. Additionally, payers were eager to shed risk and become TPA’s…moving risk to employers and collecting fees to manage the business. This further compromised their role in healthcare. Today, (unless they are in the provider business) their role has been reduced to be a “medical bank”. Employers are the new insurance and through direct contracting initiatives, they will eventually correct this trend…or at least they better.



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