fah hospital policy blog

Perspectives on health policy affecting America’s hospitals and the patients we serve.

New Report: “No Evidence” Of Provider Consolidation Boosting Hospital Price Growth

December 15, 2014 | FAH Hospital Policy Blog Team

Category: Realignment

The Altarum Institute released its December monthly Health Sector Economic Indicators report December 12th, which includes key hospital price data, and an observation on what those data are telling us about hospital realignment.  In its monthly assessment of key health care economic data points, the Altarum Institute is able to provide comparison of year-on-year changes in health care price indices, accounting for new information and trends, and offer insights on the state of the industry.

In this month’s report, covering data through October, there is a key conclusion on the impact of hospital realignment on hospital price growth—namely that there is no impact at all.  As the report explains:

Medicare and Medicaid prices usually grow more slowly than “other” prices (which include private payment). Hospital prices for Medicare and Medicaid patients changed by 0.8% and -0.9%, respectively (down 0.7% from September for Medicare and up 0.3% for Medicaid). For other patients, price growth fell to 1.9%, from 2.4% in September (data not shown). This other rate, representing mostly private payment, is the lowest since September 1998. There is no evidence that provider consolidation is boosting hospital price growth.** 

Altarum’s observation of no current evidence that hospital realignment is driving price growth echoes conclusions of a study conducted by the FTI Center for Health Care Economics and Policy earlier this year.  In its meta-analysis of contemporary realignments, FTI found no consistent statistical relationship between hospital realignment and price increases. The news from Altarum’s December report is the latest piece of evidence of a critical thought movement in health care.  More and more, we are witnessing long-standing misconceptions on provider consolidation up-ended by fresh and current data.  The old claims of realignments causing price increases and driving competition out of the market have been replaced by studies and empirical evidence pointing to the contrary.

Today, hospital realignment is recognized for increasing or maintaining access to health care, creating more competitive health care markets, and bringing significant new benefits to patients and the communities in which we operate.  Meanwhile, insurers who rely on old 1990s data to criticize hospital realignment are themselves being scrutinized, as reports reveal  health insurer consolidation continues to rise at disconcerting levels, allowing payers to create monopolies and increase their market dominance, to the detriment of consumers.

The headline from the December 12th Altarum report -- “Lowest hospital price growth in 16 years pushes down health inflation” is reinforced by even more recent November 2014 data released by the Department of Labor’s Bureau of Labor Statistics (BLS).  The BLS data show hospital prices grew only one percent in the past year, and speaks to the enduring health care spending slowdown, responsible for record-setting low price and cost growth across a number of key economic indices in health care.  Hospitals continue to work diligently to protect patient access to care while implementing key structural changes that are credited with the spending slowdown trend.

As we close out 2014, it is clear the tide of public opinion has turned on the issue of hospital realignment.  Efforts by providers to protect patient care and keep community hospitals open and thriving play an important part in the transformation of our nation’s health care system.