Mergers don’t always make for better hospitals

Many things affect your health. Genetics. Lifestyle. Modern medicine. The environment in which you live and work.

But although we rarely consider it, the degree of competition among health care organizations does so as well.

As The New York Times reports, markets for both hospitals and physicians have become more concentrated in recent years. Although higher prices are the consequences most often discussed, such consolidation can also result in worse health care.

This runs counter to claims some in the health care industry have made in favor of mergers. By harnessing economies of scale and scope, they argue larger organizations can offer better care at lower costs.

Martin Gaynor, a Carnegie Mellon University economist, says “evidence from three decades of hospital mergers does not support the claim that consolidation improves quality.” This is especially true when government constrains prices, as is the case for Medicare in the United States.
“When prices are set by the government, hospitals don’t compete on price; they compete on quality,” Gaynor says. But this doesn’t happen in markets that are highly consolidated. Read the full story.

 

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