Health System Consolidation and Impact on Providing Care, Products or Services

Health System Consolidation and Impact on Providing Care, Products or Services: Consolidation among hospitals and health systems has been increasing for some time and is now quite broad in many markets. This activity comes from mergers and acquisitions, along with a major driver of larger organizations gaining market share from smaller competitors. The degree of consolidation varies by market but is accelerating for a number of reasons. (1)

These may include a reaction to health insurer consolidation, changes in reimbursement for medical services under the health care reform law or regulation, the focus on value-based health care, outcomes-based contracting, and the growing use of alternate sites of care.

Hospital consolidation has been driven to create large health systems that were thought to provide the scale necessary to achieve operating efficiencies and compete for more cost-conscious consumers.

But “the jury is still out” on whether these mergers have delivered on that promise. A recent example was highlighted in a study on hospital pricing from some of the largest health systems in California that raised questions about the impact of hospital mergers and consolidations on healthcare costs. (2)

Because California experienced much of its health system consolidation earlier than some other parts of the nation, this study has provided insights into the long-term influence that hospital consolidation can have over prices for consumers and employers.

Also, the Midwest Business Group on Health’s (MBGH) recent survey of large employers highlighted employer skepticism regarding hospital mergers as part of the larger societal narrative questioning healthcare’s increasing costs and relative value along with full transparency for the purchaser of care, products or services. (3)

Another study of “horizontal mergers” of hospitals in the same geographic market has garnered significant attention from researchers and regulators alike. The study showed that such combinations can reduce competition among the merging providers for inclusion in insurers’ networks of providers, leading to higher prices. (4)

Most recently, an AHA-commissioned study by Charles River Associates stated that hospital mergers reduce costs by harnessing operational efficiencies that can’t be gained through looser affiliations, improve quality and expand the scope of services available to patients.

The debate will continue on the advantages and disadvantages of hospital mergers, but one thing is clear, they are not going to decrease in the near future.


1) Brookings: Health care market consolidations: Impacts on costs, quality and access; Paul Ginsberg: Wednesday, March 16, 2016

2) Kaiser Health News: As Hospital Chains Grow, So Do Their Prices For Care; Chad Terhune, June 13, 2016

3) Midwest Business Group on Health, 2016

4) Kellogg, Northwestern: The Price Effects of Cross-Market Hospital Mergers; Leemore Dafny, Kate Ho, Robin S. Lee, March 18, 2016

5) Report: Hospital mergers reduce costs, enhance quality and services, AHA News Now, January 25, 2017