Hospital Mergers Raise Costs and Reduce Care Quality, Study Finds
A recent study by the National Bureau of Economic Research (NBER) analyzed nearly 150 high-concentration hospital mergers in the U.S. from 1996 to 2022, revealing significant negative impacts on healthcare quality and market dynamics. The research indicates that hospital mergers often lead to reduced staffing, higher costs, and diminished patient care quality, which in turn contribute to increased mortality rates within affected communities. This is attributed to decreased competition and incentives, as well as cuts in staffing and funding in merged hospital systems. Wages declined by 2% to 4% for healthcare workers, and employment dropped by 9% to 13%, with staffing levels per patient falling by at least 6%. These factors collectively result in poorer healthcare outcomes, with increased mortality rates for conditions such as heart failure and pneumonia observed post-merger, alongside rising healthcare costs for patients.
Despite these findings, the American Hospital Association (AHA) maintains that mergers can benefit smaller and rural hospitals by improving access to care and supporting financially vulnerable institutions. AHA representatives argue that consolidation helps reduce costs and improve quality by leveraging larger networks. However, concerns persist among policymakers regarding the broader economic and healthcare implications of consolidation. Congressional reviews have highlighted the role of hospital mergers and vertical integration in increasing healthcare costs for both the federal government and consumers.
The policy environment has shown shifts, with prior efforts to limit market concentration being reversed, raising concerns about the trajectory of consolidation trends. Experts warn that ongoing mergers are likely to exacerbate cost pressures, reduce employment opportunities for healthcare workers, and degrade care quality. This study underscores the complex balance between potential efficiencies gained through consolidation and the risks of diminished competition and workforce reductions.
The healthcare industry continues to grapple with these dynamics as consolidation trends grow, making regulatory scrutiny and policy responses critical to addressing market power, ensuring quality care, and managing cost inflation. Monitoring changes in labor market power, provider competition, and service quality remains essential for stakeholders aiming to navigate the evolving hospital landscape. This research adds to a growing body of evidence assessing the systemic effects of hospital industry consolidation on healthcare outcomes and economic impacts.