Hospital consolidation in the healthcare industry has led to increased prices for patients without improving the quality of care. Private equity firms and large health systems are acquiring hospitals and physician practices, resulting in higher costs for patients.
For example, Kyunghee Lee, a retired dry cleaner and seamstress in northeast Ohio, experienced a significant increase in the cost of her arthritis injections after her doctor’s practice was bought by a hospital system. The addition of a “facility fee” from the acquiring hospital caused her bill to rise more than tenfold, even though she received the same treatment in the same building.
This practice of hospital consolidation is prevalent across the United States, with Medicare paying significantly more for treatments administered in hospital-owned outpatient clinics compared to independent doctor’s offices. While hospitals require additional resources to handle emergencies and crises, they are exploiting this payment difference for routine services that do not necessitate a hospital setting.
Moreover, the consolidation of small physician practices and hospitals by larger hospital systems limits patient choices and results in higher prices for services. Despite claims of increased coordination, improved care quality, and lower costs, studies have shown that prices rise without a corresponding improvement in care quality.
The impact of hospital consolidation extends to cancer patients as well, with out-of-pocket costs significantly higher when receiving treatment in a hospital-owned setting compared to an independent doctor’s office. This behavior not only harms consumers by inflating costs but also undermines market forces that typically regulate prices.
To address this issue, bipartisan support exists in Congress for site-neutral payment reform, which would ensure that patients pay the same price for routine services regardless of the care setting. Legislation such as the Lower Costs, More Transparency Act has already passed the House of Representatives with broad bipartisan support, indicating a willingness to tackle this problem.
Implementing comprehensive site-neutral payment reforms could save Medicare over $150 billion in the next decade, contributing to lowering healthcare costs that have been outpacing inflation. By curbing hospital payment abuse, access to essential healthcare services can be increased, creating a more sustainable and fiscally responsible healthcare system.
Laura and John Arnold, co-founders of Arnold Ventures, advocate for evidence-based solutions to address systemic issues like hospital consolidation. Their efforts aim to understand the root causes of problems in America and develop solutions to combat them effectively. As bipartisan support grows for reforming healthcare payments, there is an opportunity to push back against predatory practices and create a fairer healthcare system for all.
