We previously raised concerns about the most recent “The Price Ain’t Right” study by a group of academic economists that attempted to link hospital concentration and price. We went a step further and asked the very experienced team of economists with Charles River Associates to take a deeper dive. These same economists, who have worked on dozens of hospital transactions, weighed in on the first study finding it seriously flawed. Not surprisingly, this update fared little better.
While downplayed, even the authors admit that their research doesn’t conclusively link market structure with prices and so, we’d urge, should be taken with canister of salt or at best viewed as “interesting.” Among the most obvious flaws, even to non-economists, is that its conclusions rely on a database that lacks Blue Cross Blue Shield information on contracts and prices. Even a cursory review of the latest American Medical Association data on insurer market concentration show that those plans dominate the nation’s health insurance markets. Recognizing that, the authors attempt to compensate without any success. In fact, their data show that “in markets with high BCBS share, hospital mergers are not associated with any significant change in hospital prices for Aetna, Humana, and UnitedHealth post-merger.”
Other flaws include findings inconsistent with the way in which hospitals’ contracts with insurers are actually negotiated and hospitals’ preferences for certain types of contracts based on discounts-off-charges. Moreover, by focusing on a single service – MRIs – instead of an entire bundle of services to evaluate prices, the authors once again fail to appreciate the dynamics involved in real-world negotiations and so their conclusions come up short once again. In contrast, a 2017 study prepared for the AHA by Charles River Associates confirmed that hospital mergers result in efficiencies, savings, innovation and quality improvements essential to transforming health care delivery, all of which benefits patients.
For a more real-world view of hospital transactions and the benefits to patients from greater coordination and focus on quality, see the deeper dive prepared for AHA by Charles River Associates.
Hatton is AHA senior vice president and General Counsel