Rising health care prices have increased concerns about hospital and health system consolidation among policymakers, regulators, employers, and other purchasers of health coverage. Although merging hospitals and health systems claim they can achieve greater efficiencies through their consolidation, the economic literature almost universally finds that hospitals that merge have prices above those of surrounding hospitals. And increases in hospital prices have been a key factor driving the growth of commercial health insurance costs over the past decade.
As prices have risen, employers have shifted an ever greater share of the costs to employees. Over the past ten years, the average worker contribution for family coverage has increased faster than the average employer contribution (65 percent vs. 51 percent). Indeed, employee contributions have risen almost 300 percent since 1999.3 Further, the increased negotiating clout of a concentrated provider sector influences payers’ ability to maximize value-improving practices, such as alternative payment models, quality improvement, and transparency efforts.
In a series of six market-level, qualitative case studies, we assess the impact of recent provider consolidations, the ability of market participants (and, where relevant, regulators) to respond to those consolidations, and effective strategies for constraining cost growth while maintaining clinical quality. Our case studies focus on the commercial insurance market, though we recognize that providers and insurers are often operating in multiple markets, including Medicare Advantage, Medicaid managed care, and the Affordable Care Act (ACA) marketplaces. We do not attempt to quantify the effect of provider consolidation in these markets, such as through provider rate or premium changes.
This case study focuses on the Detroit, Michigan, health care market. For the interim report discussing findings across three health care markets (Detroit, Syracuse and Northern Virginia), visit https://georgetown.box.com/s/ cbd5cipawi7dsr9n0jqzz05gvwdnmex8.