“Our research suggests that health care consolidation has continued at a rapid pace and consumers are paying higher prices for hospital and physician procedures and insurance premiums as a result,” said Richard Scheffler, the study’s lead author, director of the Petris Center, and Distinguished Chair in Health Economics and Public Policy at the UC Berkeley School of Public Health and Goldman School of Public Policy.
Price and premium differences between Northern California and Southern California are particularly striking, Scheffler said.
Inpatient prices were 70 percent higher, outpatient prices were 17 to 55 percent higher and ACA premiums were 35 percent higher in Northern California than in Southern California due to a larger market concentration in the State’s northern region. Medical procedures, the study found, were 20 to 30 percent higher in Northern California compared to Southern California, even when adjusted for cost of living.
“Hospital systems have been consolidating in California for years, and we were aware that a lot of it was going on in Northern California in particular, but we were still surprised at the magnitude of the price and premium differences between Northern and Southern California,” Scheffler said.
According to the report, “the vast majority of counties in California warrant concern and scrutiny, according to the DOJ/FTC Guidelines. It continued, “Consumers are paying more for health care as a result of market consolidation. It is now time for regulators and legislators to take action.”
The report used the Herfindahl-Hirschman Index, or HHI, to measure market concentration, which is the standard statistical model employed by the U.S. Department of Justice and Federal Trade Commission. Markets with HHI’s in excess of 2,500 points are considered highly concentrated, and any merger that pushed the HHI in a market by more than 200 points is assigned “the highest concern and scrutiny.”
Fourteen counties 14 counties qualify for the list of high concern and scrutiny under the HHI model. For instance, the hospital HHI in Stanislaus County increased from 3,361 in 2010 to 5,172 in 2016. In Contra Costa County, the hospital HHI jumped more than 500 points during the same time period.
Scheffler says the market consolidation trend isn’t expect to slow any time soon, particularly with respect to hospitals buying physician practices. However, there are potential solutions.
“Stronger antitrust enforcement is one obvious potential solution, but there are numerous others as well, such as premium rate review or the active purchaser model that Covered California uses to negotiate the premium rates that insurers participating on Covered California offer to consumers,” Scheffler said. “More and closer monitoring of these trends is a must and the Petris Center will continue to do just that.”