NCPA - National Center for Policy Analysis

Centralized Healthcare

September 15, 2015

A historic level of mergers and acquisitions is reducing competition in local healthcare markets across the country. Following in the footsteps of previous market consolidation trends, hospitals are now rushing to buy physician practices. The centralization of health care services threatens consumers with reduced competition and higher prices.

  • Physician services represent 20% of healthcare services rendered and nearly $515 billion dollars in spending in 2010 (3.6% of GDP).
  • The Affordable Care Act (ACA) is driving the acceleration towards centralized medicine delivered at a local hospital by physicians employed by the hospital.
  • The consulting firm Booz & Co. predicts that 1,000 of the nation's roughly 5,000 hospitals could seek out mergers in the next five to seven years.
  • In the commercial market for private coverage, there's been a contraction in the number of carriers offering health plans, and policies make it difficult for new health plans to enter the market and replace those that are eliminated.
  • Local hospital-owned physician organizations incurred expenditures per patient 10.3% higher than did physician-owned organizations.

The architects of Obamacare believed the best way to control costs was to force healthcare providers into restrictive networks centralized under a local hospital. Traditional ways for controlling costs -- such as redesigning benefit structures or implementing increased cost-sharing -- were prohibited by the new law. Additionally, the ACA skewed reimbursement payments to favor procedures offered at hospitals. Faced with dwindling revenue and increased overhead, physician groups increasing find themselves with little choice but to be bought-out by a local hospital.

Once independent doctors become the exception rather than the rule, the continued advance of the ACA's agenda will become inevitable. Congress must pass new reform measures that allow doctors to create their own networks and to use innovation, technology, and good old-fashioned competition to keep healthcare costs down.

Source: Scott Gottleib, M.D., "The State of Competition in the Healthcare Market", American Enterprise Institute, September 10, 2015.


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