Fewer Hospitals May Lead to Higher Prices

Consolidation reduces competition in markets and gives hospitals more leverage to raise prices.

On July 16, two New York City hospital networks announced they were merging to create the largest health care system in the metropolitan area and one of the biggest in the country. The CEO of one of the hospitals said the merger would pave the way for more “efficient” and “integrated” care. Joining the two networks into one entity — to be called the Mount Sinai Health System — would also compensate for “the inability of the federal government or the state governments to be able to pay for the health care that people in the past have demanded,” he told the New York Times.

Put another way, the new large system will have more market power that may allow it to demand higher reimbursements from private insurers, ultimately raising costs for consumers.

Consolidation like this is happening all over the country, as hospitals acquire each other and merge in a trend that started decades ago and may be accelerated by the new health care law. This consolidation reduces competition in markets and gives hospitals more leverage to raise prices.

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Source: Time