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The Impact of Hospital Consolidation - Update

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This brief is an update of the 2006 synthesis examining the impact of hospital mergers on prices, costs, and quality of care. In addition to examining the literature on hospital consolidation since the 2006 synthesis was published, this update reviews the evidence on physician-hospital consolidation. The Patient Protection and Affordable Care Act (ACA) promotes Accountable Care Organizations (ACOs) and the bundling of payments across providers for an episode of care (“bundled payments”), both of which encourage consolidation between hospitals and physician practices. Key Findings: Hospital consolidation generally results in higher prices. This is true across geographic markets and different data sources. When hospitals merge in already concentrated markets, the price increase can be dramatic, often exceeding 20 percent. Hospital competition improves quality of care. This is true under both administered price systems, such as Medicare and the English National Health Service, and market determined pricing such as the private health insurance market. The evidence is more mixed from studies of market determined systems, however. Physician-hospital consolidation has not led to either improved quality or reduced costs. Studies find that consolidation was primarily for the purpose of enhanced bargaining power with payers, and hence did not lead to true integration. Consolidation without integration does not lead to enhanced performance.
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POLICY BRIEF
NO. 9 REVISED | JUNE 2012
Also see companion report available at www.policysynthesis.org
THE SYNTHESIS PROJECT
NEW INSIGHTS FROM RESEARCH RESULTS
The impact
of hospital
consolidation
—Update
SUMMARY OF KEY FINDINGS
> Hospital consolidation gener-
ally results in higher prices.
This is true across geographic
markets and different data
sources. When hospitals merge in
already concentrated markets, the
price increase can be dramatic,
often exceeding 20 percent.
> Hospital competition improves
quality of care. This is true under
both administered price systems,
such as Medicare and the English
National Health Service, and
market determined pricing such
as the private health insurance
market. The evidence is more
mixed from studies of market
determined systems, however.
> Physician-hospital consoli-
dation has not led to either
improved quality or reduced
costs. Studies find that consoli-
dation was primarily for the
purpose of enhanced bargaining
power with payers, and hence
did not lead to true integration.
Consolidation without integration
does not lead to enhanced
performance.
Introduction
In 2006, the Synthesis Project published a research synthesis on the impact of hospital
mergers on prices, costs and quality of care (38). Since that time, the literature has
expanded a great deal. We review those subsequent findings in this Synthesis Update.
In particular, we focus on the impact of hospital mergers on prices and quality, and
introduce a review of the evidence on physician-hospital consolidation (absent from
the 2006 synthesis). The Patient Protection and Affordable Care Act (ACA) promotes
Accountable Care Organizations (ACOs) and the bundling of payments across
providers for an episode of care (“bundled payments”). Both of these features of the
ACA encourage consolidation between hospitals and physician practices, which in fact
has recently accelerated.
What is the relationship between hospital consolidation
and prices?
Increases in hospital market concentration lead to increases in the price
of hospital care.1 This finding is consistent with the conclusion of the 2006 synthesis.
Since the 2006 report, several econometric studies have revisited the relationship
between price and hospital concentration, using data from a variety of sources, thereby
expanding the geographic scope of the evidence base. The prior evidence came almost
exclusively from California. The more recent evidence comes from more states (Florida,
Massachusetts) and from the entire United States (see Table 1). Ultimately, increases
in health care costs (which are generally paid directly by insurers or self-insured
employers) are passed on to health care consumers in the form of higher premiums,
lower benefits and lower wages (see, e.g., Baicker and Chandra (4)).
By Martin Gaynor, PhD1 and
Robert Town, PhD2
1 Heinz College, Carnegie Mellon
University
2 The Wharton School, University
of Pennsylvania
1 Hospital concentration measures the extent to which a market is dominated by a few (or one) hospitals. All else
equal, the higher the market concentration, the less vigorous is the resulting price competition. Consolidation within a
market (e.g., via mergers) reduces independent market participants and by doing so increases market concentration.
Table 1: Summary of hospital concentration studies since 2006
Author/
Year
Location
of data
Time frame
of analysis
Results
Akosa Antwi
et al. (2009)
CA 1999–2005 Prices increased twofold over period and growth
is highest in monopoly markets; however, changes
in market concentration are not associated with
differential price growth.
Dranove et al.
(2008)
CA
& FL
1990–2003 The association between hospital concentration and
price increased during the 1990s and leveled off
during the 2000s.
Melnick
and Keeler
(2007)
CA 1999–2003 Hospital concentration is positively associated with
price growth; hospitals in large systems experienced
higher price growth.
Moriya et al.
(2010)
US 2001–2003 Insurer concentration is negatively associated
with hospital prices; hospital price/concentration
relationship is insignificant.
Wu (2008) MA 1990–2002 Hospitals for which a rival hospital closed experienced
a price increase relative to controls.
UPDATE
June 2012
This document is an update of a
previous Synthesis Report available
at www.policysynthesis.org
ISSN 2155-3718
2 | THE SYNTHESIS PROJECT, POLICY BRIEF NO. 9 | THE ROBERT WOOD JOHNSON FOUNDATION | The impact of hospital consolidation—Update
Prices paid to hospitals by private health insurers within hospital markets vary
dramatically (22). The evidence points to differences in hospital bargaining leverage
as a principal driver of the difference between relatively expensive and inexpensive
hospital systems within the same hospital market.
Some evidence suggests that growth in prices is related to market
concentration. An important policy question is whether, in addition to leading
to a one-time price increase, hospital mergers increase the rate of growth of hospital
prices. A few studies have addressed this issue (see Table 1), with the most recent
studies giving somewhat conflicting answers to this question. Melnick and Keeler find
a positive correlation between price growth and market concentration (28). On the
other hand, Akosa Antwi et al. find that monopoly markets experienced the highest
rates of growth, but there was little relationship between changes in concentration and
the growth of prices (2).
Hospital mergers in concentrated markets generally lead to
significant price increases. Several studies have taken a retrospective look at
the impact of recent hospital mergers on prices paid to hospitals by health insurers.
This research focuses on a “case study” merger and examines the change in inpatient
prices after the merger compared with a set of “control” hospitals (see Table 2).
The magnitude of price increases when hospitals merge in concentrated markets is
typically quite large, most exceeding 20 percent. Analyses that use data spanning large
geographic regions that encompass many hospital mergers also find that, for the most
part, hospital mergers in concentrated markets result in significant price increases.
Price increases exceeded 20% when mergers
occurred in concentrated markets.
ANTITRUST ENFORCEMENT
In recent years, the Federal Trade
Commission (FTC) has become more
aggressive in challenging cases and
has had dramatically more success
than during the 1980s and 1990s.
At the time of the 2006 synthesis,
after a decade and a half long
series of unsuccessful attempts to
block hospital mergers, the Federal
Trade Commission (FTC) had just
successfully litigated its first hospital
merger case. In this case, the FTC
challenged a consummated merger
and the court found that the merger
between Evanston-Northwestern
Hospital and Highland Park Hospital
(both located in Evanston, Ill.) led to
an increase in prices. The decision
in this case is important because it
established that proximate not-for-
profit hospitals in urban areas can
increase market power by merging.
Importantly, the case also established
that, post-acquisition, hospitals are
willing to use their increased market
power to raise prices.
The findings in the Evanston-
Northwestern case gave the FTC a
firm footing for litigation of hospital
merger cases. Since 2006, the FTC
has successfully brought suit to stop
several hospital mergers. Of particular
note is the ProMedica case, in which
a federal judge granted the FTC an
injunction in its antitrust challenge of
ProMedica’s acquisition of a hospital.2
It is the first prospective merger court
victory for the enforcement agencies
in decades.3
2 United States of America Federal Trade
Commission Office of Administrative Law
Judges, Docket No. 9346, In the Matter of
ProMedica Health System, Inc., December
12, 2011 (http://www.ftc.gov/os/adjpro/
d9346/120105promedicadecision.pdf).
3 Prospective merger analysis seeks to assess
the competitive harm from a transaction
principally based on information available prior
to the consummation of the transaction.
Author/
Year
Location
of mergers
Time frame
of analysis Results
Dafny (2009) US 1999–2005 Merging hospitals had 40%
higher prices than non-
merging hospitals.
Haas-Wilson and
Garmon (2011)
Evanston, IL Mergers
of Evanston-NW &
Highland Park and
St. Therese & Victory
Memorial
1990–2003 Post-merger, Evanston-
NW hospital had 20%
higher prices than control
group; no price effect at St.
Therese–Victory.
Tenn (2011) SF Bay Area, CA
Sutter/Summit merger
1999–2003 Summit prices increased
28.4% to 44.2% compared
with control group.
Thompson (2011) Wilmington, NC
New Hanover-Cape
Fear merger
2001–2003 3 of 4 insurers experienced
a large price increase;
1 insurer experienced a
decrease in prices.
Town et al. (2006) US 1990–2002 Aggregate hospital merger
activity increased the
uninsured rate by
.3 percentage points.
Table 2: Summary of hospital merger event studies since 2006
The impact of hospital consolidation—Update | THE ROBERT WOOD JOHNSON FOUNDATION | THE SYNTHESIS PROJECT, POLICY BRIEF NO. 9 | 3
Hospital competition improves quality.
PHYSICIAN-HOSPITAL
CONSOLIDATION
It is important to distinguish between
consolidation and integration.
Consolidation is simply bringing
together two (or more) previously
independent entities. Integration
implies more—in particular,
elimination of unnecessary
duplication, creating systems to
bring the previously separate entities
together, and comprehensive
management of the organization as
a whole.
Limited data show that
consolidation between
physicians and hospitals is
increasing. Increasing numbers of
physicians are working as hospital
employees and increasing numbers
of physician practices are owned by
hospitals. The number of physicians
working as employees grew from
around 31 percent in 1996–97 to
36 percent in 2004–05 (26). Another
survey found that the percentage of
primary care physicians employed by
hospitals rose from under 20 percent
in 2000 to over 30 percent in 2008
and the percentage of specialists
employed by hospitals rose from
just over 5 percent to 15 percent
(25). The percentage of physician
practices owned by hospitals rose
from around 20 percent in 2002
to over 50 percent by 2008 (25).
On the other hand, the percentage
of hospitals with other kinds of
physician-hospital relationships, such
as physician hospital organizations
(PHOs) and independent practice
associations (IPAs), has fallen
steadily from 2000 through 2010 (3).
What is the relationship between hospital consolidation
and quality?
At least for some procedures, hospital concentration reduces
quality. Since the 2006 synthesis report, many new econometric studies have
examined the impact of hospital competition on quality of care, using data from
a variety of sources, including studies from outside the United States. The new
econometric studies can be divided into two types: those that examine markets with
administered prices and those that examine markets with market determined prices.
Hospital competition improves quality under an administered pricing
system. Studies of the impact of competition on hospital quality under an
administered price regime are based on the U.S. Medicare program and the English
National Health Service (NHS), which made a transition to administered prices in
a 2006 reform. The evidence presented in the 2006 synthesis was entirely from the
Medicare program. The findings from those studies were mixed, but the strongest
evidence was that tougher competition led to enhanced quality of care. Those results
are reinforced by newer studies from the NHS, which uniformly show a positive
impact of competition on the quality of care. The 2006 reform in the NHS was
intended to create competition among hospitals for patients, by allowing patients
to choose their hospital, while setting regulated prices in a manner very similar to
the Medicare DRG-based system.4 The studies all show a substantial impact of the
introduction of hospital competition in the NHS on reducing mortality rates (see
Table 3). While it is not possible to draw direct conclusions about the United States
based on evidence from the United Kingdom, these studies add to the growing
evidence base that competition leads to enhanced quality under administered prices.
Table 3: Summary of hospital quality-competition studies with administered prices
since 2006 (continued on next page)
Author/
Year
Location
of data
Time
frame of
analysis
Does
competition
increase
quality? Results
Cooper
et al.
(2011)
England 2002–08 Yes Acute myocardial infarction (AMI) mortality
fell significantly faster after the reforms in less
concentrated markets. This led to 300 fewer
AMI deaths per year.
Gaynor
et al.
(2010)
England 2003–04,
2007–08
Yes All-cause and AMI mortality fell significantly
faster after the reforms in less concentrated
markets. There were no effects on length of
stay, expenditures or productivity. This led
to 4,791 life years saved from deaths from
all-causes averted, and 1,527 AMI life years
saved. Benefits outweigh costs.
Bloom
et al.
(2010)
England 2006 Yes Hospitals in less concentrated markets have
better management, and better management
leads to reduced mortality. Adding an
additional hospital close by improves
management quality and thereby reduces
heart attack mortality by 10.7%.
4 The NHS reforms introduced: patient choice among hospitals, regulated prices, and performance incentives for
hospital managers. Previously a local public entity selectively contracted with hospitals (often sole source) to
provide care for their patients. Contract negotiations focused on price, not quality. Patients had little choice and
hospital managers had little incentive to compete for patients on quality. See Cooper et al. (13), Gaynor et al.
(20) for more details.
4 | THE SYNTHESIS PROJECT, POLICY BRIEF NO. 9 | THE ROBERT WOOD JOHNSON FOUNDATION | The impact of hospital consolidation—Update
Physician-hospital consolidation studied so far
did not involve true integration.
Table 3: Summary of hospital quality-competition studies with administered prices
since 2006 (continued from previous page)
Author/
Year
Location
of data
Time
frame of
analysis
Does
competition
increase
quality? Results
Beckert
et al.
(2012)
England 2008–09 Yes Hip replacement patients are significantly
more likely to choose higher-quality
hospitals. A 5% increase in a hospital’s
mortality rate decreases demand by 6.9%.
Hospital mergers substantially reduce the
responsiveness of demand to mortality.
Gaynor
et al.
(2011)
England 2003–04,
2007–08
Yes Coronary artery bypass graft surgery (CABG)
patients’ responsiveness to hospital mortality
rates is substantially higher after the reforms.
A 1% increase in a hospital’s mortality rate
reduces its market share by over 4% after the
reforms. The change in elasticity due to the
reform led to a significant reduction in mortality.
Competition improves quality where prices are market determined,
although the evidence is mixed (Table 4). There have also been substantial
additions to this literature since the 2006 synthesis. The findings from these studies
are more mixed than the findings of recent studies of markets with administered
prices. This stands to reason: if hospitals can compete on both price and quality, then
when they face tougher competition they will choose to compete by whichever means
is most effective. If buyers are considerably more responsive to price than quality (for
example, if price is easier to measure), then enhanced competition can lead to lower
prices, but also less attention to quality. On the other hand, if quality is particularly
salient, then tougher competition can enhance quality.
All of the U.S. studies except for one find that competition improves quality, while
the English studies uniformly find negative effects.5 The difference appears to most
likely be due to differences in the possibility of patient choice between the United
States and England (in the 1990s).
In the United States, prices are negotiated by price-sensitive insurers. These insurers
have strong incentives to obtain lower prices, since their customers, typically employers,
are responsive to price differences. Insurers, however, do not engage in sole-source
contracting. They contract with sets, or “networks,” of hospitals. Patients are thus free to
exercise choice of hospital within a network (which is often quite broad). Hospitals have
an incentive to compete on quality in order to attract patients within a network. As a
consequence, there are both price and quality incentives in play.
In contrast, in England in the 1990s, negotiation was done by a single local public entity
(Primary Care Trust, or PCT) for all individuals in a geographic area, and contracts were
sole source. Purchasers could use savings obtained via lower prices to purchase more
care (particularly elective care). Hospitals’ operating incomes came from contracts with
purchasers. Information on quality was not publicly available. This led to negotiations
focused on price, not quality. As a consequence, patients had little or no choice of hospital,
and there was far less incentive for hospitals to compete on quality to attract patients.
PHYSICIAN-HOSPITAL
CONSOLIDATION, CONT.
Consolidation between physicians
and hospitals is of great interest both
because of the potential consolidation
has for creating integration, and the
impetus created by the ACAs push
towards creating Accountable Care
Organizations (ACOs) and emphasis
on bundled payments. In theory, there
are substantial gains to be made from
consolidation. However, there are
also concerns that consolidation may
have adverse impacts on competition.
Consolidation can simply be an
attempt by providers to enhance
bargaining power vis à vis insurers.
The research evidence on
physician-hospital consolidation
does not find evidence supporting
either clinical gains or cost
reductions (9, 27). The most likely
reason is that most consolidation did
not lead to true integration. Evidence
on this topic comes from examination
of physician-hospital organizations in
the 1990s. Current consolidation is
too recent to allow for studies of its
effects. While the successes of certain
prominent integrated organizations,
such as Geisinger Health System,
InterMountain Healthcare, or the Mayo
Clinic, are frequently mentioned as
support for gains from consolidation,
these are ad hoc examples, selected
for their positive results. They do not
constitute research evidence.
5 The English studies are of a prior reform in the 1990s which emphasized price competition (see Propper et al.
(31) for more details).
The impact of hospital consolidation—Update | THE ROBERT WOOD JOHNSON FOUNDATION | THE SYNTHESIS PROJECT, POLICY BRIEF NO. 9 | 5
A major next step for research in this area is sorting out the factors that determine
whether competition will lead to increased or decreased quality. Whether competition
leads to increased or decreased quality depends on its relative impacts on how
responsive hospital choice is to price versus quality. Future research can focus on trying
to recover estimates of these key elements, as well as understanding institutional and
policy factors that affect the competitive environment.
Table 4: Summary of hospital quality-competition studies with market determined prices
since 2006
Author/
Year
Location
of data
Time frame
of analysis
Does
competition
increase
quality? Results
Sohn and
Rathouz (2003)
California 1995 Yes Competition reduced angioplasty
mortality.
Encinosa and
Bernard
(2005)
Florida 1996–2000 No Low hospital operating margin
(possibly due to competition) led to
more patient safety events.
Propper et al.
(2004)
England 1995–98 No Hospitals facing more competitors
had higher mortality rates in a
deregulated environment.
Capps
(2005)
New York 1995–2000 Yes Hospital mergers had no impact on
many quality indicators, but did lead
to increases in mortality for AMI and
heart failure patients.
Propper et al.
(2008)
England 1991–99 No Mortality increased at hospitals
with a larger number of competitors
following deregulation.
Howard
(2005)
US 2000–02 Yes Demand for kidney transplants is
responsive to graft failure. As demand
becomes more responsive, hospitals
have to compete harder to attract or
retain patients.
Abraham et al.
(2007)
US 1990 Yes Quantity increases with the number
of hospitals. This will happen only if
quality increases or price falls. This
therefore implies that an increase in
the number of hospitals increases
competition.
Cutler et al.
(2010)
Pennsylvania 1994–95,
2000,
2002–03
Yes Removing barriers to entry in the form
of certificate of need laws led to entry
and increased market shares for low
mortality rate CABG surgeons.
Escarce et al.
(2006)
California,
New York,
Wisconsin
1994–99 Yes Mortality for patients with a variety
of conditions is lower in less
concentrated markets in California
and New York. There are no effects in
Wisconsin.
Rogowski et al.
(2007)
California 1994–99 Yes Mortality for patients with a variety of
conditions is lower where hospitals
have more competitors.
Romano and
Balan (2011)
Chicago
Primary
Metropolitan
Statistical
Area (PMSA)
1998–99,
2001–03
Yes A hospital merger in the Chicago
suburbs had no effect on some quality
indicators, and harmed some others.
PHYSICIAN-HOSPITAL
CONSOLIDATION, CONT.
Consolidation is often motivated
by a desire to enhance bargaining
power by reducing competition.
Burns et al. (10) find that hospital-
physician alliances increase
with the number of HMOs in the
market. They infer that providers
may be consolidating in order to
achieve or enhance market power.
More recently, Berenson et al. (6)
conducted 300 interviews with
health care market participants, and
reported that increased bargaining
power through joint negotiations is
one of several reasons for hospital-
physician alliances.
Ciliberto and Dranove (12) and
Cuellar and Gertler (14) are
econometric studies that examine
the impact of physician-hospital
consolidation. Both papers look
at the effects of physician-hospital
consolidation on hospital prices.
The two studies find opposite
results—Cuellar and Gertler
find evidence consistent with
anticompetitive effects of physician-
hospital consolidation, while Ciliberto
and Dranove find no such evidence.
It appears that consolidation is often
motivated by a desire to enhance
bargaining power by reducing
competition, but the limited evidence
on whether this leads to higher
hospital prices is mixed.
Physician-hospital consolidation is often
motivated by enhanced bargaining power.
6 | THE SYNTHESIS PROJECT, POLICY BRIEF NO. 9 | THE ROBERT WOOD JOHNSON FOUNDATION | The impact of hospital consolidation—Update
Additions to the evidence base since the 2006 research synthesis reinforce
the findings that hospital competition leads to lower prices. The expanded
evidence on competition and quality shows that competition leads to
higher quality when there are administered prices. The evidence is less
straightforward when prices are market determined, although the majority of
studies show that competition improves quality. Our review of the research
on physician-hospital consolidation does not suggest that such consolidation
(absent true integration) will lead to cost reductions or clinical improvement,
and may lead to enhanced market power for providers.
Policy developments since the 2006 synthesis give policy-makers both some
cause for optimism and some cause for concern.
> The FTC’s recent successes in blocking horizontal hospital mergers
should prevent further consolidation, thereby constraining price
increases and likely improving the quality of care.
> Nonetheless, many hospital markets remain highly concentrated and
noncompetitive. And, the prospect that the ACA could encourage
greater physician-hospital consolidation gives some cause for concern.
> While the current evidence base is not very supportive of initiatives
to encourage physician-hospital integration, given the current
interest in this kind of consolidation and the promotion of ACOs and
bundled payments, more evidence is clearly needed on the impacts of
consolidation on costs, quality and prices.
Conclusions and
Policy Implications
THE SYNTHESIS PROJECT (Synthesis) is an initiative of the Robert Wood
Johnson Foundation to produce relevant, concise, and thought-provoking briefs
and reports on today’s important health policy issues.
PROJECT CONTACTS
David C. Colby, Ph.D., the Robert Wood Johnson Foundation
Katherine Hempstead, Ph.D., the Robert Wood Johnson Foundation
Sarah Goodell, M.A., Synthesis Project
SYNTHESIS ADVISORY GROUP
Linda T. Bilheimer, Ph.D., National Center for Health Statistics
Jon B. Christianson, Ph.D., Universit y of Minnesota
Paul B. Ginsburg, Ph.D., Center for Studying Health System Change
Jack Hoadley, Ph.D., Georgetown University Health Policy Institute
Haiden A. Huskamp, Ph.D., Harvard Medical School
Julia A. James, Independent Consultant
Judith D. Moore, Independent Consultant
William J. Scanlon, Ph.D., National Health Policy Forum
Michael S. Sparer, Ph.D., Columbia University
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The Synthesis Project
The Robert Wood Johnson Foundation
Route 1 & College Road East
P.O. Box 2316
Princeton, NJ 08543-2316
E-Mail: synthesisproject@rwjf.org
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www.policysynthesis.org
THE SYNTHESIS PROJECT
NEW INSIGHTS FROM RESEARCH RESULTS
POLICY BRIEF NO. 9
JUNE 2012
... Previous studies have shown, however, that hospital consolidation may actually increase prices and health system costs [4,5]. There is still a paucity of recent data on its effect on quality of care and outcomes, specifically in cardiovascular disease. ...
... Health care policy over the past two decades encourages consolidation of markets-leading to increased market concentration-with the formation of accountable care organizations and use of bundled payments [4]. While the goal of these policies has been improvement in coordination of care, there are likely unintended effects on costs of care and patient outcomes [23]. ...
Article
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Background: As health care markets in the United States have become increasingly consolidated, the role of market concentration on physician treatment behavior remains unclear. In cardiology, specifically, there has been evolving treatment of acute myocardial infarction complicated by cardiogenic shock (AMI-CS) with increasing use of mechanical circulatory support (MCS). However, there remains wide variation in it use. The role of market concentration in the utilization of MCS in AMI-CS is unknown. We examined the use of MCS in AMI-CS and its effect on outcomes between competitive and concentrated markets. Methods and results: We used the National Inpatient Sample to query patients admitted with AMI-CS between 2003 and 2009. The primary study outcome was the use of mechanical circulatory support. The primary study exposure was market concentration, measured using the Herfindahl-Hirschman Index, which was used to classify markets as unconcentrated (competitive), moderately concentrated, and highly concentrated. Baseline characteristics, procedures, and outcomes were compared for patients in differently concentrated markets. Multivariable logistic regression was used to examine the association between HHI and use of MCS. Results: There were 32,406 hospitalizations for patients admitted with AMI-CS. Patients in unconcentrated markets were more likely to receive MCS than in highly concentrated markets (unconcentrated 46.8% [5087/10,873], moderately concentrated 44.9% [2933/6526], and high concentrated 44.5% [6676/15,007], p < 0.01). Multivariable regression showed that patients in more concentrated markets had decreased use of MCS in patients in later years of the study period (2009, OR 0.64, 95% CI 0.44-0.94, p = 0.02), with no effect in earlier years. There was no significant difference in in-hospital mortality. Conclusion: Multivariable analysis did not show an association with market concentration and use of MCS in AMI-CS. However, subgroup analysis did show that competitive hospital markets were associated with more frequent use of MCS in AMI-CS as frequency of utilization increased over time. Further studies are needed to evaluate the effect of hospital market consolidation on the use of MCS and outcomes in AMI-CS.
... Previous studies have shown that most consolidations are largely characterized as lacking meaningful integration of management, culture, and data systems and are typically associated with decreased competition, more concentrated markets, and less innovation. 7,8 The research concludes that this vastly common approach to consolidation suggests financial rather than quality motivations for mergers. ...
... HACs (ie, CLABSIs and CAUTIs) were assessed as infections per 1000 device-days and per 1000 discharges. 8 Rates per catheter-day and per discharge were both included because interventions to reduce infection rates included both avoidance of device placement (ie, fewer patients with any device) and initiatives to reduce risk in those with devices. All events were routinely identified by the quality department following national standards for case finding. ...
Article
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Importance Hospital consolidations have been shown not to improve quality on average. Objective To assess a full-integration approach to hospital mergers based on quality metrics in a safety net hospital acquired by an urban academic health system. Design, Setting, and Participants This quality improvement study analyzed outcomes for all nonpsychiatric, nonrehabilitation, non-newborn patients discharged between September 1, 2010, and August 31, 2019, at a US safety net hospital that was acquired by an urban academic health system in January 2016. Interrupted time series and statistical process control analyses were used to assess the main outcomes and measures. Data sources included the hospital’s electronic health record, Centers for Medicare & Medicaid Services Hospital Compare, and nursing quality reports. Exposures A full-integration approach to the merger that included: (1) early administrative and clinical leadership integration with the academic health system; (2) rapid transition to the academic health system electronic health record; (3) local ownership of quality metrics; (4) system-level goals with real-time actionable analytics through combined dashboards; and (5) implementation of value-based and other analytic-driven interventions. Main Outcomes and Measures The primary outcome was in-hospital mortality. Secondary outcomes included 30-day readmission, patient experience, and hospital-acquired conditions. Results The 122 348 patients in the premerger (September 2010 through August 2016) and the 58 904 patients in the postmerger (September 2016 through August 2019) periods had a mean (SD) age of 55.5 (22.0) years; the total sample of 181 252 patients included 112 191 women (61.9%), the payor mix was majority governmental (144 375 patients [79.7%]), and most admissions were emergent (121 469 patients [67.0%]). There was a 0.71% (95% CI, 0.57%-0.86%) absolute (27% relative) reduction in the crude mortality rate and 0.95% (95% CI, 0.83%-1.12%) absolute (33% relative) in the adjusted rate by the end of the 3-year intervention period. There was no significant improvement in readmission rates after accounting for baseline trends. There were fewer central line infections per 1000 catheter days, fewer catheter-associated urinary tract infections per 1000 discharges, and a higher likelihood of patients recommending the hospital or ranking it 9 or 10. Conclusions and Relevance In this quality improvement study, a hospital merger with a full-integration approach to consolidation was found to be associated with improvement in quality outcomes.
... When a hospital joins an insurer's network, the hospital signs a contract that stipulates how and what they will be paid. Unfortunately, because most of these contracts contain clauses that prohibit their terms from being released, little is known about precisely how insurers pay each hospital (Reinhardt 2006;Gaynor and Town 2011). However, in addition to analyzing price levels, the richness of the HCCI data also enables us to estimate the types of insurer-hospital contracts that are being struck. ...
... The results in Table IV, Panel A are robust to measuring prices in a multitude of ways, such as (i) risk-adjusting our inpatient price measure with patients' Charlson score; (ii) riskadjusting our inpatient price using ICD-9 diagnosis codes instead of DRG fixed effects (about 9,235 ICD-9 codes versus 746 DRG codes), and measuring price in levels instead of logarithms (see Online Appendix Table XIII). 48 Our results are consistent with earlier, single-state studies of hospital prices and market structure (mostly using data from California), which have found strong positive and statistically significant correlation between hospital market concentration and prices (see Vogt and Town 2006;Gaynor and Town 2012). Table IV, Panel B has the same specification as in Panel A but changes the dependent variable to the percent of cases paid as a share of hospital charges. ...
Article
We use insurance claims data covering 28% of individuals with employer-sponsored health insurance in the United States to study the variation in health spending on the privately insured, examine the structure of insurer-hospital contracts, and analyze the variation in hospital prices across the nation. Health spending per privately insured beneficiary differs by a factor of three across geographic areas and has a very low correlation with Medicare spending. For the privately insured, half of the spending variation is driven by price variation across regions, and half is driven by quantity variation. Prices vary substantially across regions, across hospitals within regions, and even within hospitals. For example, even for a nearly homogeneous service such as lower-limb magnetic resonance imaging, about a fifth of the total case-level price variation occurs within a hospital in the cross section. Hospital market structure is strongly associated with price levels and contract structure. Prices at monopoly hospitals are 12% higher than those in markets with four or more rivals. Monopoly hospitals also have contracts that load more risk on insurers (e.g., they have more cases with prices set as a share of their charges). In concentrated insurer markets the opposite occurs-hospitals have lower prices and bear more financial risk. Examining the 366 mergers and acquisitions that occurred between 2007 and 2011, we find that prices increased by over 6% when the merging hospitals were geographically close (e.g., 5 miles or less apart), but not when the hospitals were geographically distant (e.g., over 25 miles apart).
... know little about if and, in particular, how hospital mergers might impact the quality and safety of care. For one, studies that report on how hospitals perform on a set of quality indicators pre-and post-merger, deliver inconsistent and inconclusive results (Gaynor and Town, 2012;Hayford, 2012;Ho and Hamilton, 2000;Mutter et al., 2011;Romano and Balan, 2011;Vogt and Town, 2006). Also, they often offer little explanation as to how the effects observed might have come about. ...
... These studies operationalise the quality of care by comparing a set of quality indicators pre-and postmerger, testing for differences. When reviewing what the effects of hospital mergers on quality of care are, it proves difficult to say if mergers impact the quality of care positively or negatively (Gaynor and Town, 2012;Vogt and Town, 2006). Although some studies find either positive or negative effects, most studies have difficulties identifying effects in either one direction, and often the different quality indicators selected to operationalise the quality of care point in different directions Ho and Hamilton, 2000;Mutter et al., 2011). ...
Purpose Despite the continuation of hospital mergers in many western countries, it is uncertain if and how hospital mergers impact the quality of care. This poses challenges for the regulation of mergers. The purpose of this paper is to understand: how regulators and hospitals frame the impact of merging on the quality and safety of care and how hospital mergers might be regulated, given their uncertain impact on quality and safety of care. Design/methodology/approach This paper studies the regulation of hospital mergers in The Netherlands. In a qualitative study design, it draws on 30 semi-structured interviews with inspectors from the Dutch Health and Youth Care Inspectorate (Inspectorate) and respondents from three hospitals that merged between 2013 and 2015. This paper draws from literature on process-based regulation to understand how regulators can monitor hospital mergers. Findings This paper finds that inspectors and hospital respondents frame the process of merging as potentially disruptive to daily care practices. While inspectors emphasise the dangers of merging, hospital respondents report how merging stimulated them to reflect on their care practices and how it afforded learning between hospitals. Although the Inspectorate considers mergers a risk to quality of care, their regulatory practices are hesitant. Originality/value This qualitative study sheds light on how merging might affect key hospital processes and daily care practices. It offers opportunities for the regulation of hospital mergers that acknowledges rather than aims to dispel the uncertain and potentially ambiguous impact of mergers on quality and safety of care.
Article
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Objectives: For oncological care, there is a clear tendency towards centralisation and collaboration aimed at improving patient outcomes. However, in market-based healthcare systems, this trend is related to the potential trade-off between hospital volume and hospital competition. We analyse the association between hospital volume, competition from neighbouring hospitals and outcomes for patients who underwent surgery for invasive breast cancer (IBC). Outcome measures: Surgical margins, 90 days re-excision, overall survival. Design, setting, participants: In this population-based study, we use data from the Netherlands Cancer Registry. Our study sample consists of 136 958 patients who underwent surgery for IBC between 2004 and 2014 in the Netherlands. Results: Our findings show that treatment types as well as patient and tumour characteristics explain most of the variation in all outcomes. After adjusting for confounding variables and intrahospital correlation in multivariate logistic regressions, hospital volume and competition from neighbouring hospitals did not show significant associations with surgical margins and re-excision rates. For patients who underwent surgery in hospitals annually performing 250 surgeries or more, multilevel Cox proportional hazard models show that survival was somewhat higher (HR 0.94). Survival in hospitals with four or more (potential) competitors within 30 km was slightly higher (HR 0.97). However, this effect did not hold after changing this proxy for hospital competition. Conclusions: Based on the selection of patient outcomes, hospital volume and regional competition appear to play only a limited role in the explanation of variation in IBC outcomes across Dutch hospitals. Further research into hospital variation for high-volume tumours like the one studied here is recommended to (i) use consistently measured quality indicators that better reflect multidisciplinary clinical practice and patient and provider decision-making, (ii) include more sophisticated measures for hospital competition and (iii) assess the entire process of care within the hospital, as well as care provided by other providers in cancer networks.
Article
Objective To examine non-profit hospitals’ financial and spending allocations when the private sector payment rate is higher than the Medicare's payment rate. Data Sources Hospital financial data for 2014 – 2018 from Center for Medicare and Medicaid Services Hospital Cost Reports, hospital characteristics from the American Hospital Association (AHA) Annual Survey. Study Design Hospital and year level fixed effects regressions modeling each hospital's 1) operating net income per discharge equivalent (DE); 2) administrative cost per DE; 3) patient care cost per DE; 4) registered nurse per bed; charity care cost per DE; and 5) provision of unprofitable services as a function of the private sector to Medicare payment ratio (PMR). Data Collection/Extraction Methods Hospital/year-level data from hospital cost reports merged with AHA data. Samples included general short-term hospitals with non-profit ownership, excluding critical access hospitals. Principal Findings Final sample included a total of 8,862 hospital-year observations, with a mean PMR of 1.62. Non-profit hospitals having a 0.1 higher PMR was associated with $257 (95% CI: $181 - $334) increase in operating net income per DE; $66 (95% CI: $32 - $99) increase in administrative cost per DE; $170 (95% CI: $120 - $220) increase in patient care cost per DE; and $18 (95% CI: $10 - $25) increase in charity care cost per DE. We found hospitals hired 0.86 (95% CI: -0.08 - 1.81) more registered nurses per 100 beds, but no evidence on providing more beds for unprofitable services, such as obstetric care, burn care, alcohol/drug abuse treatment, or psychiatric care. Conclusions Higher private sector prices led primarily to greater surplus and administrative cost for non-profit hospitals, and smaller increases in spending on services that will directly benefit patients. This article is protected by copyright. All rights reserved.
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Medical Malpractice claims are frequently asserted in the United States. At various time and places, an extraordinarily high number of claims and payouts led to what some have called medical malpractice crises. Consequently, in some geographical locations physicians either could not purchase malpractice insurance as carriers withdrew from the market, or, insurance became increasingly expensive and the overall costs associated with the delivery of health care continued to rise. Other undesirable consequences of these crises included a shortage of qualified physicians in certain parts of the country. Many of the states responded to these problems legislatively through a long series of tort reform measures. The health care industry itself has evolved in numerous ways. In particular, many health care providers have turned away from traditional private insurance models to self-insured models such as captives. Further, the industry has continued to consolidate, with fewer, but larger hospitals and clinics, and with an increasing number of physicians employed directly by hospitals and large clinics. The results of all of these changes have had mixed results.
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