Hospital Concentration Study Rehashes Flawed Argument

The same cohort of authors responsible for the Health Care Pricing Project’s flawed 2015 paper recently released an updated version. However, the update fails to upgrade the paper’s status as an unreliable attempt to link hospital concentration and price. 

Although the paper claims to consist of new updates, it relies on old data – and in some instances, on decade-old data ­– that seriously predates the effects of public and private payers shifting to value-based payments. The paper also excludes data from Blues plans – which dominate the insurance market in at least 40 states – and fails to adequately account for the significant effects of commercial insurer concentration. With an arbitrary mileage radius to define hospital markets, the geographic areas used to assess hospital market structure don’t accurately measure competition. And finally, the paper’s measure of total spending per beneficiary fails to account for drug spending, which, between FY2013 and FY2015, soared by 38.7 percent on a per admission basis and by an average 23.4 percent annually on an inpatient basis.

A study on the benefits of hospital mergers by Charles River Associates in January 2017, which used more recent data, found that “net patient revenue per admission—which includes revenue associated with patients covered by commercial MCOs—declined at the acquired hospitals in our study relative to revenue at comparable non-merging hospitals.”[i] This is directly contrary to the authors’ suggestions (based on older data) that contemporary mergers result in price increases. That same study found that mergers have the potential to drive quality improvements through standardization of clinical protocols and investments to upgrade facilities and services at acquired hospitals. In addition, mergers typically expand the scope of services available to patients, and build upon existing institutional strengths to provide more comprehensive and efficient care.