Big health systems blamed for affordability crisis

America’s health care affordability crisis is driven by unchecked health care consolidation, particularly among hospitals, according to a report released by Families USA.

The report contended that this consolidation “gives major health care corporations the ability to set high and irrational prices with no accountability or improvement in health outcomes or health care quality.

“With few truly competitive hospital markets left in the country, most of our nation’s families get their care through large corporate hospital systems that charge nearly three times more for hospital care than what Medicare pays for the same services,” the report continued. “These corporate health systems are charging excessive prices and raking in tens of millions of dollars each year, while patients and families struggle to pay their medical bills.”

Families USA analyzed financial data and commercial insurance prices from more than 2,800 hospitals across 49 states and the District of Columbia from 2018 to 2023, and concluded that ”unchecked hospital consolidation and high hospital prices are a major driver of unaffordable health care across the United States, leading to substantial profits and operating margins for some of the largest corporate health systems in the country.

“These findings suggest that corporate hospital chains often plead poverty to avoid accountability for their high and irrational prices, even as their own self-reported data indicates that they are generating millions of dollars in profits.”

A handful of systems control most healthcare

The report found that a handful of corporate hospital systems in each state now control most of American hospital care. In 42 states and the District of Columbia, five or fewer health systems in each state controlled at least half of all hospital care in 2023. In nearly half of all states, just three systems controlled the majority of care that year. This level of consolidation gives major hospitals the ability to set prices with no meaningful competition or accountability, the report said.

The biggest health care systems earned the most, according to the report. Individual hospitals owned by a health system generated nearly 10 times more in annual net income ($27.7 million) than independent hospitals not owned by a health system ($3.0 million). Rural independent hospitals generated the lowest average net income ($2.3 million).

But nonprofit hospitals can charge high prices too, the report found. Despite their tax-exempt status granted on the premise that they provide community benefit, nonprofit hospitals charged nearly as much as for-profit hospitals (276% of the Medicare rate versus 297% of the Medicare rate, respectively) and brought in nearly as much in annual net income ($24 million versus $26.8 million, respectively), offering consumers no better protection from price gouging.

The biggest differentiator is whether a hospital is independent. The report found that independent hospitals — hospitals not owned or affiliated with a health system — charged a much lower average commercial price of 221% of the Medicare rate and generated an average of $3 million in annual net income per hospital, a fraction of what system-owned hospitals collected.

What Congress can do

Families USA called on Congress to take the following actions to lower health care costs and hold hospitals accountable for charging excessive healthcare prices.

• Enact site-neutral paymentsso the same care costs the same everywhere.
• Mandate full price transparencyacross hospitals and health plans.
• Ban anticompetitive practicesbetween hospital systems and insurers.
• Strengthen oversight of nonprofit hospitalsto ensure real community benefit.
• Limit hospital prices or hospital price growth relative to Medicare benchmarks.

The Families USA report comes on the heels of a House Ways and Means Committee hearing in which committee chairman, Rep. Jason Smith, R-Mo, told hospital system CEOs that hospital consolidation and mergers “are fueling the borderline extortionary prices hospitals charge patients.”

He blamed hospital consolidation and mergers as one factor leading to high healthcare costs.

Families USA, in its report, said, “Excessive hospital pricing is a systemic problem, but it is solvable.

“Congress has clear tools available, including increasing price transparency, strengthening oversight of consolidation, and curbing anticompetitive and abusive pricing practices to bring prices closer to reasonable benchmarks. Lowering hospital prices would reduce costs for families and employers and improve access to care. The question is not whether solutions exist but whether there is the political will to act.”

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Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].