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Market-Based Solutions to Vital Economic Issues
Research
Apr 12, 2021

Reversing Hospital Consolidation: The Promise Of Physician-Owned Hospitals

Economic theory holds that competition drives innovation, improves the quality of goods and services, and lowers prices for consumers. Health care delivery is no exception. The COVID-19 pandemic and resulting operational challenges in hospital care delivery have stimulated policy makers’ appetite to address longstanding problems in hospital market efficiency and consolidation. In large part because of mergers, the vast majority of US metropolitan residents now live in highly concentrated hospital markets.

As policy experts and researchers consider opportunities to engender flexibility, expand capacity, and promote competition in the nation’s hospital industry, a sector plagued by 20 years without labor productivity growth, recent research has reaffirmed the challenges of hospital market consolidation. Hospital and physician consolidation into health systems results in the loss of both price and non-price competition. Well-documented, specific harms of provider consolidation are many, including a lack of quality benefits and decrement in patient experiencephysician burnout due to a loss of control over the practice environment, and higher hospital prices driving rising insurance premiums and ultimately rising costs to consumers.


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