Health care consolidation in the United States means that hospitals, doctor groups, and other providers are joining together or being bought by bigger systems. Between 2002 and 2020, there were over 1,000 hospital mergers in the country. This has a big effect on money. According to the Congressional Budget Office (CBO) and data from the House Budget Committee hearing on “Breaking Up Health Care Monopolies,” hospitals raised their prices by about $521 after merging.
Vertical consolidation — when hospitals buy doctor groups or work with pharmacy benefit managers (PBMs) — has also grown quickly. Now, 41% of doctors work in hospital-owned or linked practices, which is 12% more than ten years ago. This change has affected how care is given and often makes costs higher. In places where one system is very strong, prices for doctor services are 14% to 30% higher than in places with more competition.
This consolidation not only raises prices but also limits patient choices. In areas like cancer treatment, over 700 independent cancer clinics were taken over by hospitals between 2008 and 2020. When this happens, it can make it harder to find smaller independent practices that might offer more personal care. Patients may also have to pay higher prices set by big health systems.
Also, the drug supply chain is controlled by a few big PBMs. Right now, three big PBMs handle about 79% of all drug claims. These PBMs are connected to big health insurers, and this makes drug costs higher for patients.
From a larger view, federal spending on health care is very high and growing fast. Federal health care spending is expected to almost double, going from $1.7 trillion in 2024 to $3.2 trillion by 2034. This will raise national health costs from 17% of the country’s total economic output to 20%. Chairman Jodey Arrington of the House Budget Committee said that health care costs now go beyond the national defense budget and add to a national debt close to $35 trillion. About 60 cents of every federal dollar spent this year is just to pay the debt, which makes it harder to pay for other important needs.
Prices go up after consolidation because there is less competition in the market. When hospitals buy or join with doctor groups, they control the market more. This lets them get higher payments from insurance companies. Higher prices mean that patients and government programs like Medicare and Medicaid pay more.
In places with many mergers, the prices for doctor services are between 14% and 30% higher than in places with fewer mergers. This shows how big health systems have more power to negotiate with insurance companies. Smaller, independent medical practices have a hard time competing with large hospital-owned groups because the bigger groups have more resources and influence.
This problem is also seen in other services and drug prices. Just three PBMs handle 79% of drug claims and are tied to insurance companies. This less competition and means drug prices can go up, making it harder for patients to pay.
Consolidation can also make it harder for patients to find different care options. When hospitals take over small doctor offices, they may change how patients get referred, how appointments are made, and how care is organized. Patients might wait longer or be pushed toward certain hospital services.
Chairman Arrington said that current rules often encourage hospitals to buy up small practices. This limits competition and patient choice. When one system has most of the market, health care costs get higher, and there are fewer independent providers who might offer more personal or flexible care.
Some people say that consolidation can help by making care more coordinated or efficient. While this might be true in some cases, data shows that higher prices and fewer choices usually happen after consolidation, which often cancels out those benefits.
As costs rise, health systems and medical practices are working on ways to manage expenses while keeping good care.
One good method is to use standard contracts and bundle services. Outsourcing areas like IT, human resources, foodservice, labs, pharmacies, clinical engineering, and cleaning can save money. For example, outsourcing foodservice can cut system costs by about 11%, and standardizing cleaning services can lower hospital costs by about 5%. Better cleaning also lowers infections caught in hospitals. Around 1 in 31 patients gets an infection while in the hospital, which can increase readmission and costs.
Improving how patients move through the hospital is also helpful. Using standard transport systems and special transport staff cuts delays, improves bed use, and lets medical staff focus on care. This leads to shorter wait times and better experiences for patients.
Staffing is very important due to nursing shortages and high worker turnover. About 40% of health care workers quit within their first year because they don’t get enough training or support. Providing good onboarding, training, and ongoing learning helps keep staff. Studies show 70% of workers stay longer if they get good training, and 87% of Millennials feel this way.
Recognition programs, like the Compass One Healthcare GEM award, have helped keep staff longer by more than 20%. Good morale and steady workers not only save hiring costs but improve care quality.
Finally, fixing problems like malnutrition for hospital patients is important. Over half of patients come to the hospital malnourished. This causes many readmissions that cost hospitals billions. Proper coding and early treatment for malnutrition help hospitals get more money and avoid extra costs.
Using technology, especially artificial intelligence (AI) and workflow automation, is a growing way to improve how medical practices work and cut costs. Medical administrators, owners, and IT managers can use AI tools to handle front desk tasks, lower staff workload, and improve patient communication with little extra cost.
AI front-office phone systems can do tasks like scheduling, routing calls, and answering questions without a person. This lowers the need for more receptionists and cuts wait times for patients.
Such automated phones work 24/7, making patients happier and cutting missed appointments, which affect income. AI also collects data on call needs, helping administrators plan staff hours better.
Workflow automation connected to electronic health records cuts down on repetitive jobs like patient registration, checking insurance, and managing referrals. This saves time and stops errors that could delay payments.
By automating simple tasks, staff can focus on harder jobs that need human thinking. This is important when there are not enough workers and labor costs are rising.
Besides front-office use, AI tools help clinical decisions, find patients likely to be readmitted, and spot coding chances, like malnutrition, that help improve hospital payment and cut costs.
Health care spending is expected to grow 5.4% each year, faster than the overall economy’s 4.6%. Using technology to be more efficient is key for medical practices to stay open and control costs.
The federal government knows the money problems caused by consolidation and is thinking about changes to fix them. The House Republican Lower Cost More Transparency Act includes site neutral payment reforms. This is a plan supported by both parties to cut high payments made when hospitals buy doctor offices.
Site neutral payment reform means Medicare will pay the same for a service no matter where it is done — in a hospital outpatient area or an independent doctor’s office. Right now, hospitals get paid more for the same outpatient procedures just because they own the place. This encourages hospitals to buy more doctor offices and raises costs.
By stopping this, site neutral payments could save taxpayers over $150 billion in 10 years. This also helps competition by giving independent practices a fair chance and helps patients keep choices.
The law also pushes for clearer prices, so patients and payers can make better decisions in a market that is often hard to understand.
Health care managers and practice owners must know how consolidation affects money and patients. Rising costs from mergers, vertical integration, and market control need smart actions such as:
By using these steps, medical practices can work better in the health care system affected by consolidation. Being efficient and cutting extra costs is key to staying financially healthy and giving good care to patients.
The hearing focuses on the budgetary effects of health care consolidation and explores policy solutions to enhance competition, with the goal of reducing healthcare costs and expanding patient choices.
Chairman Arrington stated that the national debt is approaching $35 trillion.
Federal health care spending is projected to nearly double from $1.7 trillion in 2024 to $3.2 trillion in 2034.
There were over 1,000 hospital mergers between 2002 and 2020.
Consolidation has led to increased prices for physician services, with costs in highly concentrated markets being 14% to 30% higher than in less consolidated areas.
41% of physicians are vertically integrated with a hospital or health system, marking a 12% increase over the past 10 years.
Over 700 independent cancer clinics were acquired by hospitals between 2008 and 2020 due to consolidation.
Vertical consolidation has resulted in 79% of drug claims being processed by three pharmaceutical benefit managers, increasing drug costs for Americans.
Site neutral payment reform could save taxpayers over $150 billion within a ten-year budget window.
The Act aims to improve market transparency and includes site neutral payment reforms to lower healthcare costs and increase access for patients.
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