Hospital Consolidations Affect the Cost, Quality, and Price of Hospital Care

Serious efforts to control health care costs will have to account for the effect of dominant health care systems. This synthesis of the academic literature illustrates why. Between 1994 and 2001, hospital prices to private payers rose 20 percent, but they increased more than 40 percent between 2001 and 2008. The price increases followed a wave of hospital consolidations, perhaps resulting from the financial pressures that hospitals were experiencing as demand and prices for inpatient services fell under managed care. Although approaches to measuring hospital costs vary, most studies show that hospital consolidations result in higher prices for hospital services. Studies examining the effect of consolidation on quality of care are mixed. Overall the evidence suggests that hospital consolidation slightly reduces quality. Consolidation may reduce costs by making hospitals more efficient but the savings are modest and do not usually result in lower prices. Antitrust policy in health care markets is evolving and revisions to merger guidelines are likely.