The nation’s hospitals have been merging at a rapid pace for a decade, forming powerful organizations that influence nearly every health care decision consumers make.
The hospitals have argued that consolidation benefits consumers with cheaper prices from coordinated services and other savings.
But an analysis conducted for The New York Times shows the opposite to be true in many cases. The mergers have essentially banished competition and raised prices for hospital admissions in most cases, according to an examination of 25 metropolitan areas with the highest rate of consolidation from 2010 through 2013, a peak period for mergers.
The analysis showed that the price of an average hospital stay soared, with prices in most areas going up between 11 percent and 54 percent in the years afterward, according to researchers from the Nicholas C. Petris Center at the University of California, Berkeley.
During the Obama years, the mergers received nearly universal approval from antitrust agencies, with the Federal Trade Commission moving to block only a small fraction of deals. State officials generally looked the other way.
But not only have big consolidations continued, the behemoths have further cemented their reach in some regions of the country by gobbling up major doctors’ and surgeons’ practices.
“You have to watch for these systems throwing their weight around,” said Xavier Becerra, the California attorney general whose office has sued Sutter Health, a sprawling system in the northern part of the state. “We are looking for cases where consolidation does nothing for efficiency and leads to distortions of the market.”
Ted Doolittle, who heads Connecticut’s Office of the Healthcare Advocate, has fielded angry complaints from residents, but he sees few options available to officials. “A lot of this is too little and too late,” he said.
Finding new paths for growth
The latest giant hospital consolidations continue to stir concerns. Dignity Health and Catholic Health Initiatives, two large chains, are expected to become one of the nation’s largest groups — with 139 hospitals in 28 states — by the end of the year. And two of Texas’ biggest systems, Baylor Scott & White Health and Memorial Hermann Health System, recently announced plans to combine.
The New Haven area has witnessed the most significant decline in competition. Yale New Haven Health, one of the largest hospital groups in Connecticut, took over the only competing hospital in the city and has also aggressively expanded along the state’s coast. The group recently added another hospital to its collection, merging Milford with its Bridgeport location.
Although the price of a hospital admission in the New Haven-Milford area was already three times higher than in other parts of the state, prices surged by 25 percent from 2012 to 2014, compared with 7 percent elsewhere in the state, according to the Petris Center.
In the national analysis, a third of the metropolitan areas experienced increases in the cost of hospital stays of at least 25 percent from 2012 to 2014, from roughly $12,000 to at least $15,000.
Prices rise even more steeply when these large hospital systems buy doctors’ groups, according to Richard Scheffler, director of the Petris Center.
Thousands of Connecticut residents were stranded without a local hospital last year when another big hospital group, Hartford HealthCare, battled the state’s biggest health insurer over how much it would charge for patient care.
Its six hospitals are clustered around the state capital and are the only resort for residents in broad swaths of the eastern part of the state. This month, it announced plans to add a seventh hospital to its network.
“These systems are empire-building, there’s no question,” said Jill Zorn, a senior policy officer for the Universal Health Care Foundation of Connecticut, which seeks to improve access for residents. “But to whose benefit?”
Numerous studies by economists and others have underscored how hospital consolidation is driving up the cost of medical care. “Within the academic community, there is near unanimity,” said Zack Cooper, a health economist at Yale University who is among a group of researchers that has looked at how dominant hospitals affect prices.
Some hospitals need a savior
The emergence of a one-hospital town is inevitable in many places, and the Parkersburg, W.Va., area is no exception. St. Joseph’s merged with neighboring Camden-Clark Memorial in 2011, and then they were consumed by what is now the state’s largest health system.
Residents can get most care locally but they go to Morgantown, where the academic medical center is situated, for complex conditions. “We’ve elevated the level of care,” Mr. Wright said.
But private insurers are paying more. In the Parkersburg-Vienna area, the overall price of a hospital stay increased 54 percent from 2012 to 2014, after the mergers. That is compared with 10 percent elsewhere in the state, according to the Petris Center.
Large systems “get paid better by some of the insurers,” Mr. Wright said.
Flailing hospitals often have little choice but to be acquired or go out of business, and a larger system can offer badly needed capital and management skills. “They can fix a hospital and benefit the community,” said Torrey McClary, a lawyer who specializes in mergers at King & Spalding.
When Yale New Haven Health took over the Hospital of Saint Raphael, a Catholic hospital six blocks away from its New Haven location, Saint Raphael was in danger of going under. Over the last six years, the system has invested more than $200 million in capital improvements at Saint Raphael, said its president Richard D’Aquila, including modernizing “everything behind the walls.”