Everywhere, hospitals are merging — but why should you care?

Gregory Curfman, MD
Gregory Curfman, MD, Editor in Chief, Harvard Health Publications

All across America, hospitals are merging. In 2014 alone, there were 95 mergers, acquisitions, and joint ventures among U.S. hospitals, down only slightly from 98 in 2013. What is fueling this strong trend toward hospital consolidation — and more importantly, why should you, as a consumer of health care, be concerned about it?

Like many stories, there are two sides to this one.

Hospital administrators who create the mergers tell one side of the story. They believe that hospital consolidation improves efficiency, access to care, and quality of care, and may lower costs because in theory, the more care a hospital provides, the more efficient and less expensive it should become. For example, when a smaller hospital merges with a larger, better-equipped hospital system, patients at the smaller hospital may acquire better access to specialists and to advanced medical technologies, such as high tech imaging procedures and electronic medical record systems.

From this point of view, consolidation seems like a positive trend that will offer benefits to consumers.

But the story doesn’t end there. In contrast to hospital administrators, many health economists are wary about the growing number of hospital mergers. When individual hospitals merge into larger systems, they gain a larger share of the consumer health market. That puts them in a position to ask health insurance companies to pay more for medical care and procedures. These higher prices are not borne by the insurers, but by consumers in the form of greater premiums. Thus, some economists argue, mergers drive up health care costs and place added financial pressure on consumers.

A recent example is discussed in an article published today in The New England Journal of Medicine. Partners HealthCare, comprising Massachusetts General Hospital and Brigham & Women’s Hospital (both in Boston), along with 12 other health care organizations, is the dominant health care system in eastern Massachusetts. Partners wanted to expand further by acquiring three additional hospitals in their region. The Massachusetts Health Policy Commission, an independent state agency aimed at reducing health care costs and improving quality, voiced opposition to these acquisitions on the grounds that they would drive up health care costs in the state.

The state’s attorney general, Martha Coakley, sued Partners in an attempt to contain the plan, but eventually settled the case when Partners agreed to certain price and cost-growth restrictions.

But the deal also had to be reviewed in state court, and Superior Court Judge Janet Sanders decided to strike down the settlement because of her fear that the consolidation plan would reduce competition and drive up prices for consumers.

Dr. Kenneth Davis, the CEO and president of Mount Sinai Health System in New York, had a different perspective. In a recent article in the Wall Street Journal, Dr. Davis wrote, “The fear that mergers curtail competition, leading to higher prices for medical care, reflects an old way of thinking. Thanks to cataclysmic changes in the delivery of health care, hospital mergers now offer the potential for higher quality and more efficiency.”

But Leemore Dafny, a professor at the Kellogg School of Management at Northwestern University, sees things differently.  She wrote, “What is wrong is that too much market power is concentrated in the hands of too few large providers.  I’d be interested in learning more about how attorneys general can promote competition.”

From the standpoint of consumers, hospital mergers may offer expanded access to health care services, but this may very well come at a cost — higher prices for those services and higher insurance premiums. So if a hospital merger happens in your area, be aware of what might be coming down the road.

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  1. Mr. Mrs John buda

    Thank you for your hospital merger article; however, the notion of
    “Efficiency” AND “QUAlITY” medical care as translated by the teaching
    Hospitals via the insurance companies is an oxymoron; the actual patient
    experience is an automated manufacturing line where the Drs. Give their patients 15 min of their time; the junior uncertified technicians who are
    Uncertified not even by state agencies are graded by how many patients
    they see per hour; and the novice fellows experiment with note taking
    On patient interviews. The disintermediation or separation of the Dr.
    From the patient is not worth a nickel let alone the 25 plus K cost of
    What is termed “healthcare”. This is expensive socialized medicine, a fraud.

  2. Ida Louise Grace

    I would have liked a more in-depth article on hospital mergers–e.g.,
    Hospitals planning on merging, anticipated increase in costs to
    consumers. The retired person on a fixed income cannot handle
    many more increases in health costs and costs of living. Federal
    and state taxes are a heavy burden on us.

    Thank you for the article. I enjoyed it very much.

    Louise Grace

  3. John F

    Excluded from the discussion was the conversion of the smaller hospitals from not-for-profit status to becoming part of a for-profit network. Focus on profits has prioritized maximizing charges, increasing the volume of services (whether required or not), and squeezing out competitor hospitals. Would have liked to see what the author researched as far as that impact has been.

  4. Bill Reger-Nash

    Hospital mergers seem to be another example of avaricious greed. When are hospitals going to attempt to focus on high quality affordable care instead of maximizing profits at every turn? Hospital mergers in principal can provide a greater spectrum of services lesexpensively, when in fact they never do.

    • Michael

      I agree w/ Mr Reger-Nash. Further, it looks to me like the insurance companies are the real customer of this medical industry, and I as a patient am simply a commodity. I also agree w/ Mr. Mrs John buda, in that …” the actual patient experience is an automated manufacturing line where the Drs. Give their patients 15 min of their time; the junior uncertified technicians who are Uncertified not even by state agencies are graded by how many patients they see per hour”…
      Yep. Mass production. I doubt the doctors are happy w/ this system. But I’m sure it works for CEOs, big insurance and big pharma.