Health Economist Warns Against Potentially Harmful Health Care Mergers

By Consumers for Quality Care, on January 10, 2024

Dr. Rachel Werner, the Executive Director of the Leonard Davis Institute of Health Economics and Professor of Medicine at the University of Pennsylvania, recently joined Wisconsin Public Radio’s “The Morning Show” to discuss her research on the negative effects of health care mergers.

Hospitals often claim mergers improve efficiency, reduce duplicative services, and cut operating costs. But Dr. Werner’s research shows that these claims are unfounded. In fact, she says that mergers usually lead to higher health care prices without significant quality improvements. When hospitals merge, they gain negotiating leverage over insurers, and then use this leverage to charge higher prices for health care services.

In recent years, hospital mergers have increased, and private equity firms, backed by Wall Street investors, have contributed to this troubling trend. These PE firms are investing more and more in the health care industry, including by acquiring and merging what were once small and independent physician practices. The result has been increased consolidation and decreased competition, which have led in turn to higher prices and reduced access to care.

During recent testimony in the Pennsylvania statehouse, Werner warned that a decrease in competition often leads to higher prices for consumers. “It is important to recognize that the burden of these higher prices ultimately falls on patients through higher health care insurance premiums,” said Werner. “By and large, (evidence) suggests that the quality of care is worse in highly consolidated markets compared to markets with more competition.”  

Dr. Werner suggests that lawmakers can combat anticompetitive tactics by more actively monitoring industry mergers, promoting transparency in pricing, and regulating insurers’ contracting practices to prevent anticompetitive behavior. These measures can help mitigate the negative effects of health care consolidation in the market.

Decreased competition hurts consumers, often leading to fewer options for care and higher out-of-pocket costs. CQC urges regulators and lawmakers to promote more competition and to discourage mergers and business practices that leave consumers worse off.