The monopolization of health care goes beyond hospitals

June 12th, 2019

Over the past decade, health policy experts have documented an increase in consolidation of health providers, as hospital systems are buying more and more physician practices. From 2012 to 2016, the number of hospital-acquired physician practices increased from 35,700 to more than 80,000. By 2018, 44 percent of physicians were employed by hospitals or health systems, nearly double the rate in 2012. 

Although hospitals often claim consolidation helps improve care coordination and efficiency, others warn that consolidation also leads to higher prices for health care services, because larger health systems can command greater market share. According to researchers at the Health Care Pricing Project, prices at hospitals that have a regional monopoly are 12 percent higher overall, compared to hospitals that have four or more “rivals.” At the same time, insurers are consolidating to be able to negotiate harder with hospitals on prices; most regions have highly or extremely highly concentrated markets for both health providers and insurers.

However, the consolidation of health care services has gone beyond just mergers of health care practices and insurers. A new report from the Open Markets Institute, an independent journalism and advocacy organization, highlights monopolies in unexplored health care sectors, such as medical waste disposal services, ambulance manufacturing, diagnostic laboratories, and many more. Here are some interesting tidbits from the investigation:

Why are monopolies so prevalent in the health care sector? For some industries, such as manufacturing of ambulances, dialysis machines, and PET scanners, start-up costs could be a barrier to entry. For hospitals, there are factors that encourage consolidation, such as technology needs that require more capital, and the shift to value-based care that rewards more coordinated care. 

However, health care is not really unique when it comes to consolidation among American industries. 

“Pretty much anywhere you go in this economy, whether it’s eyeglasses or beer or automobiles or airplanes, if you ask the right questions, you’ll find it’s much more concentrated than it was before,” said Phil Longman, policy director of Open Markets, in Modern Healthcare. “That’s true in health care, including all of its component parts.”

As with other industries, health care companies are consolidating because they can; the Federal Trade Commission has had little success enforcing antitrust laws in the courts. Additionally, the FTC is not allowed to prosecute non-profits for anticompetitive tactics, even though many hospitals that are expanding and raising prices are non-profits. 

As health care providers and companies continue to merge and expand, we should be critical of the effect this is having on health care prices and access to care. “More rigorous antitrust enforcement is essential to solving America’s health care crisis,” said Longman in a press release. “What are the chances the taxpayers get a good price if we don’t fix the monopoly problem?”