When UNC Health Care and Carolinas HealthCare announced last fall that they intended to merge marry, they touted that the partnership would help them negotiate better deals with vendors. What they likely wanted you to hear was “we will spend less money, and pass the savings on to you.” But there’s a reason they didn’t say it that clearly.
It’s not true.
Market competition is one of the forces that has made our country great. When multiple businesses offer a similar service, like health care, competition forces them to appeal to customers by providing better quality services and better prices. Study after study shows that when hospital competition is reduced, prices go up.
Even scarier, quality goes down, which means worse health outcomes and increased mortality.
A recent study co-authored by scholars from Harvard University, Harvard Business School and Columbia University found “that hospitals acquiring another system member in-state raise price by 7-10 percent”
Sadly, 7-10% may be conservative. A 2006 Robert Wood Johnson Foundation study found that “Prices increase 40 percent or more when merging hospitals are closely located.” Worse, they never saw evidence that prices would decline and that in the best case circumstances, prices rose “at least 5%.”
In a recent letter to the CEOs of UNC and CHS, Blue Cross NC CEO Patrick Conway reaffirmed this point, as reported by the News and Observer:
Blue Cross said in a letter Wednesday that “a thorough review of independent research” consistently shows that health care consolidation drives up prices for consumers.
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So what about those savings from vendor negotiations? Where is it expected to go?
It’s hard to say, but it is certainly not being passed on to the patients.
In an interview last summer, Elizabeth Rosenthal, the Editor in Chief of Kaiser Health News, had the following to say about hospitals:
“go into your local hospital and look around. And the marble lobbies, the art, the concierges at the front desk - our hospitals look like not five-star hotels - seven-star hotels. I mean, I think the most stark thing when people go overseas is hospitals in Europe, which deliver really high-quality care. They look like junior high schools. You know, they're not fancy, but the care is good.”
This, combined with nine-figure hospital construction projects becoming the norm, might give us a clue.
Is a 40% increase in the price of healthcare worth it to you for some better lobby art?
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