Complacency Slows Aggressive Approaches to Health Care Cost Containment: A View from Three Markets

By Sabrina Corlette, Jack Hoadley, Katie Keith

In the last decade, there has been a well-documented wave of consolidation among hospitals, physicians, and other providers. This includes horizontal hospital mergers as well as vertical consolidation—acquisition of physician groups by larger health systems. Also well documented are the increases in prices for services that tend to follow provider consolidation.

The commercially insured bear the biggest brunt of this upward pressure on prices, including the over 150 million Americans covered under their employer’s health plan. Commercial rates for hospital services are on average 89 percent higher than what Medicare pays for the exact same service, as much as 500 percent higher in some markets. The result is that family premiums for commercial, employer-based coverage average an eye-popping $19,616 per year (a 55% hike since 2008).

Despite this steady rise in costs, provider consolidation has received less attention from many employers (and the payers that negotiate on their behalf) than other cost drivers, such as prescription drug prices. We need to understand the ability of payers and employers to respond to provider consolidation, and the tools available for them to do so. We conducted three market-level qualitative case studies in Detroit, Syracuse, and Northern Virginia. An additional three markets will be studied over the next year on behalf of the National Institute for Health Care Reform.

To learn more about what we found, visit the full post on the Health Affairs blog, available here.

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