Health System Mergers Result in Higher Costs, Lower Quality of Care for Consumers

By Consumers for Quality Care, on May 14, 2024

A new report by the American Economic Association, reported by The Wall Street Journal, finds that health care mergers do little if anything to benefit consumers. Instead, these mergers have been found to decrease competition, raise costs, and reduce the quality of care.

The health care sector has seen a recent uptick in hospitals acquiring entire health systems that create local and regional networks. These newly formed health systems then use that leverage to increase their bargaining power with insurers, forcing insurers to increase their prices. Typically, these increased costs are ultimately passed onto consumers. The study found that not long after health care mergers went into effect, health care prices for consumers rose anywhere between 1.6 percent and 5.2 percent. These tactics have resulted in national health care spending increasing by over $200 million in the year after these deals are enacted.

“When those hospitals have market power, they can use that to extract high prices from insurers and those costs are ultimately passed onto consumers,” said Amanda Starc, Associate Professor of Strategy at Northwestern University. 

The Biden administration has condemned these types of mergers before, arguing that consolidation in the health care industry usually results in higher prices and lower quality of care for consumers.

Decreased competition hurts consumers, often leading to fewer options for care and higher out-of-pocket costs. CQC urges regulators and lawmakers to scrutinize mergers in the health care system and work to ensure that consumers do not foot the bill for anti-competitive practices.