Case Study Analysis: The Northern Virginia Health Care Market

Center on Health Insurance Reforms

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. 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 Northern Virginia health
care market (Arlington, Fairfax, Prince William, and Loudoun
counties and the independent cities of Fairfax, Alexandria,
and Falls Church). For the interim report discussing findings
across three health care markets (Detroit, Syracuse and
Northern Virginia), visit