Independent Hospital Acquisitions Tied to Higher Healthcare Prices

Independent hospital acquisitions led to higher healthcare prices for consumers and poorer care quality, a report from Elevance Health revealed.

Health systems are increasingly acquiring independent hospitals. Between 2000 and 2020, the share of hospital markets without any independent hospitals grew from 7 percent to 25 percent. By 2020, in 75 percent of markets, the two largest health systems controlled over half of the market’s hospital bed capacity.

The study used hospital admissions data from Elevance Health-affiliated commercial health plans, claims data, and data from the American Hospital Association (AHA) survey to assess how these acquisitions have impacted independent hospitals.

After being acquired by a health system, hospitals saw a 6 percent decrease in operating expenses without any offsetting cost increases at the acquiring system. Around 60 percent of the decline was attributed to reductions in personnel spending. Employment fell by 3 percent due to a decrease in the number of employees in support functions.

Payers and consumers experienced higher prices following independent hospital acquisitions.

Average inpatient prices for commercially insured patients grew by 5 percent above market trend. Similarly, prices increased by 5 to 8 percent across the top seven major diagnostic categories by volume. Digestive, infectious diseases, labor and delivery, respiratory, and the circulatory system faced the steepest price increases.

The size of the acquiring system did not influence the extent of price increases at the acquired hospitals, indicating that price growth was uniform at the formerly independent facilities.

Hospital acquisitions were also associated with worse patient outcomes. Readmission rates grew by 10 to 12 percent for Elevance Health’s affiliated members receiving cardiac care. The rates remained high for three years after an acquisition. Additionally, readmission rates for Medicare patients with acute, non-deferrable conditions increased by 2 to 3 percent following a hospital acquisition.

A reduction in personnel may be a driving factor behind poorer quality, as hospitals with greater staff reductions faced higher readmission rate increases, the report noted.

In-hospital mortality, 90-day mortality in Medicare, and patient satisfaction scores did not change after a hospital acquisition. However, acquisitions negatively impacted patient access to care in some areas, with researchers identifying maternity ward closures at rural hospitals.

The study findings highlight how mergers and acquisitions may increase healthcare costs for consumers without improving care quality. In the future, policymakers could consider implementing quality standards in the merger review process. Furthermore, employers and health plans could establish value-based partnerships with independent hospitals to help them remain independent.