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Big hospital systems are using their size and market clout to drive up employer health plan costs, the ERISA Industry Committee says in a new analysis of hospital prices.
Congress should fight hospital market consolidation and ban hospital contract demands that further reduce the level of price competition, ERIC says.
Related: Indiana cracks down on what big, nonprofit hospital systems can charge employers
Medicare and Medicaid pay hospitals much less for care than employer plans do. Some policymakers have asked ERIC whether employers' hospital bills are soaring because hospitals are charging employer plan patients more to make up for losses on public plan patients.
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"Payor mix and cost-shifting are not primary determinants of market rates," ERIC argues. "Instead, a range of market forces, including provider consolidation, employer bargaining power, and regional pricing dynamics play a more influential role in shaping the rates employers ultimately pay for health care services."
ERIC is a Washington-based group that represents large employers with self-insured health plans.
What it means: The ERIC analysis may be a sign that fights in Congress about whether to break up big health care organizations, and whether to limit future mergers and acquisitions in the health care sector, are about to get louder.
The backdrop: Hospital groups have argued that their member organizations have just survived the COVID-19 pandemic, are facing severe cost-cutting pressure from all payers, and need to maintain enough excess capacity and build enough financial reserves to handle future health care or economic crises.
The hospital groups point to waves of hospital bankruptcies and closings as evidence that hospitals are not swimming in cash.
Insurers and employer groups have argued that the big hospital systems are in a much different position than small hospitals.
Publicly traded hospital systems and private equity firm owners "roll up," or acquire, large numbers of hospitals and medical practices, close many of the acquired organizations, then use their increased size and market share to demand higher prices, insurers and employer groups say.
The Trump administration has taken a keen interest in health care sector competition.
A U.S. Justice Department has put out a request for information about laws and regulations that limit competition in the health care sector.
The department has backed the health care provider plaintiffs in a suit against health plans over the process for setting reimbursement rates for out-of-network care.
The ERIC analysis: The authors of the ERIC analysis have drawn on existing studies from research organizations like RAND.
One RAND paper showed that a hospital merger within the same market leads to a 2.6% increase in hospital prices, or an extra $521 in bills per admission.
"Cross-market mergers, however, were not found to lead to significant price increases," the ERIC analysts write. "The study found no substantial correlation between payor mix and the negotiated rates between employers and providers."
The RAND findings support the idea that local hospital market concentration is the main factor driving up hospital costs, the analysts write.
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Allison Bell
Allison Bell, a senior reporter at ThinkAdvisor and BenefitsPRO, previously was an associate editor at National Underwriter Life & Health. She has a bachelor's degree in economics from Washington University in St. Louis and a master's degree in journalism from the Medill School of Journalism at Northwestern University. She can be reached through X at @Think_Allison.
