Medical monopolies cost consumers

The health care industry calls it consolidation, but the rapid pace of hospital mergers and the frenzy of hospitals and large medical groups to buy up individual practices — turning independent physicians into employees — has the look and feel of monopolization. As with all monopolies, this one is reducing competition and raising costs to consumers.

The trend in hospital mergers is growing steadily and is expected to continue doing so until federal regulators step in or there aren’t any hospitals left to merge with. In 2012, 247 hospitals were involved in mergers and the rate has increased by about 3 percent a year since then. One health care consulting firm has predicted that a fifth of the nation’s nearly 5,000 community hospitals are likely to attempt mergers over the next seven years.

In 2004, about 25 percent of physician practices were owned by a hospital. By 2011, hospitals employed more than half of the physicians practicing in the US. In some localities, in specialties such as cardiology, the proportion of physicians still in private practice has fallen to the vicinity of 10 percent.

Proponents of consolidation claim that it yields economies of scale that will permit physicians and hospitals to provide a higher quality of care. There are few independent studies that convincingly back up that argument.

There are, however, numerous studies that show that any cost efficiencies that may be realized don’t find their way to consumers of health care. In fact, costs for health care go up nearly 20 percent on average when delivered by a hospital-owned physician practice. For some procedures, such as infusing chemotherapy, the price can be double.

The initial price hikes are borne by insurance companies that have to bow to the hospital’s increased rate-negotiating power. And they’re borne by Medicare and Medicaid as a result of regulations that allow about 80 percent more to be paid for a given procedure when it’s linked to a hospital rather than a physician’s office.

Ultimately, of course, the increased costs of health care consolidation are borne by patients, by buyers of insurance, by taxpayers… that is, you.

As a trend line, this fits with a multitude of other sectors that match the same dominate pattern: from media outlets to retail, to giant utilities and beyond, across-the-board deregulation has opened the flood gates to corporate takeovers.