Nationwide well being spending totaled $4.5 trillion in 2022—17% of gross home product (GDP)—and is projected to develop sooner than GDP by 2032, contributing to larger prices for households, employers, states, and the federal authorities. As policymakers take into account quite a lot of methods to make well being care extra reasonably priced, they’ve been more and more attentive to the consequences of consolidation in well being care markets and the potential implications for price and high quality of care. Hospital consolidation has been a topic of specific focus partly as a result of almost one third of all well being spending goes in direction of hospital care. Consolidation might enable suppliers to function extra effectively and assist struggling suppliers hold their doorways open in underserved areas, however usually reduces competitors. A considerable physique of proof has discovered that consolidation can contribute to higher prices, with unclear results on high quality.
This evaluation examines the competitiveness of markets for hospital care, based mostly on RAND Hospital Knowledge—a cleaned and processed model of price experiences from Medicare-certified hospitals—and American Hospital Affiliation (AHA) survey knowledge. This piece describes competitors amongst unbiased hospitals and well being programs, referring to each as “well being programs” all through for brevity. Competitors is measured in 3 ways: the share of metropolitan statistical areas (MSAs) managed by a small variety of well being programs, the extent of market focus in MSAs based mostly on the Herfindahl-Hirschman Index (HHI), and the share of hospitals affiliated with well being programs over time. Utilizing hospital knowledge from 2022 (the latest 12 months accessible), this evaluation focuses on basic short-term or basic medical or surgical hospitals relying on the dataset and excludes federal hospitals (see Methods for extra particulars).
Key Takeaways
- One or two well being programs managed all the marketplace for inpatient hospital care in almost half (47%) of metropolitan areas in 2022.
- In additional than 4 of 5 metropolitan areas (82%), one or two well being programs managed greater than 75 % of the market.
- Almost all (97% of) metropolitan areas had extremely concentrated markets for inpatient hospital care when making use of HHI thresholds from antitrust tips to MSAs.
One or Two Well being Techniques Managed the Whole Marketplace for Inpatient Hospital Care in Almost Half (47%) of Metropolitan Areas in 2022
Almost one in 5 (19%) metropolitan statistical areas (MSAs) have been managed by a single well being system, and multiple in 4 (27%) markets have been managed by two programs in 2022 (see Determine 1). In additional than 4 of 5 metropolitan areas (82%), one or two well being programs managed greater than 75 % of the market. These markets all met the definition of extremely concentrated markets based mostly on thresholds in present antitrust tips (see under). One well being system managed no less than half of the market in three out of 4 MSAs (75%) and no less than 1 / 4 of the market in almost each MSA (98%).
The variety of well being programs in a given MSA tends to extend with the inhabitants of the area. For instance, in 79% of MSAs with a inhabitants of lower than 200,000, one or two well being programs managed all the marketplace for inpatient hospital care in 2022, as within the Muncie, IN; Napa, CA; and Amherst City-Northampton, MA MSAs (Determine 2). MSAs with one or two well being programs account for almost half (47%) of all MSAs however 12% of the U.S. inhabitants dwelling in metropolitan areas.
Conversely, nearly all (53 of 54) MSAs with a inhabitants of no less than a million individuals had no less than 4 well being programs, as within the MSAs encompassing Detroit, Miami, and Phoenix. MSAs with 4 or extra well being programs accounted for 35% of all MSAs however 79% of the U.S. inhabitants dwelling in metropolitan areas.
Nevertheless, in 9 of those comparatively massive MSAs with 4 or extra well being programs, the 2 largest well being programs managed no less than 75% of the market, and in 37 of those areas, they managed no less than 50% of the market. For instance, within the MSA encompassing Austin, TX, with 2.4 million residents, two programs (HCA Healthcare and Ascension Well being) managed 85% of the inpatient hospital care market, although Austin is residence to greater than 4 well being programs. The metropolitan space encompassing Portland, OR, with 2.5 million residents and greater than 4 well being programs, is a much less concentrated market than Austin’s, however the two largest programs (Legacy Well being and Windfall) nonetheless management a mixed 56% of the market. (See Methods for dialogue about MSAs as geographic hospital markets).
Almost all (97% of) metropolitan areas had extremely concentrated markets for inpatient hospital care in 2022 based mostly on thresholds utilized in present antitrust tips
One other option to assess market competitiveness is to guage a measure of focus often known as the Herfindahl-Hirschman Index (HHI), which is predicated on the variety of contributors in a market and their respective shares. The measure runs from 0 (completely aggressive) to 10,000 (monopoly market). Primarily based on current merger guidelines from the Federal Commerce Fee (FTC) and Division of Justice (DOJ), markets might be grouped into three classes: not concentrated (HHI < 1,000), reasonably concentrated (1,000 – 1,800), and extremely concentrated (HHI > 1,800). This evaluation calculates HHIs for MSAs and teams these areas accordingly, although there are different methods of defining the boundaries of hospital markets (see Methods).
Almost all (97% of) MSAs had extremely concentrated markets for inpatient hospital care in 2022 based mostly on thresholds utilized in present merger tips (Determine 3). These tips mirror updates in 2023 that lowered the HHI thresholds for reasonably concentrated and extremely concentrated markets. Primarily based on the thresholds utilized in prior tips, a big majority however considerably smaller share (93%) of MSAs have been extremely concentrated markets for inpatient hospital care in 2022, nearer to an estimate from an earlier study (90%) that used knowledge from 2016.
As was the case when counts of well being programs in MSAs, bigger metropolitan areas tended to be much less concentrated and extra aggressive than much less populated metropolitan areas, though this was not at all times the case. All 13 MSAs that have been recognized as both not concentrated or reasonably concentrated had multiple million residents, such because the MSAs encompassing Cincinnati, Oklahoma Metropolis, and Miami. Nevertheless, 41 MSAs with multiple million residents—together with the MSAs encompassing Houston, Denver, and Atlanta—had extremely concentrated hospital markets. General, 70% of individuals dwelling in metropolitan areas lived in extremely concentrated hospital markets.
The share of hospitals affiliated with well being programs elevated from 56% in 2010 to 67% in 2022, with the share rising in each rural and nonrural areas
About two thirds of hospitals (67%) are actually half of a bigger system, a rise from 56% in 2010 (Determine 4). A smaller share of rural than nonrural hospitals have been a part of a well being system in 2022 (52% versus 83%), although shares have elevated over time for each rural and nonrural areas: from 43% in 2010 to 52% in 2022 amongst rural hospitals and from 69% in 2010 to 83% in 2022 amongst nonrural hospitals.
Most system-affiliated hospitals in 2022 (53%) have been a part of a system with no less than 15 hospitals, and 22% have been in a system with no less than 50 hospitals. Techniques with no less than 100 hospitals accounted for 13% of system-affiliated hospitals.
Hospitals becoming a member of bigger programs might not at all times cut back native market competitors, for instance, if an unbiased hospital is acquired by a bigger system that doesn’t personal amenities in the identical market. Nevertheless, mergers between hospitals that function in numerous geographic markets for affected person care—also referred to as “cross-market” mergers—might nonetheless result in larger costs in some instances.
This work was supported partly by Arnold Ventures. KFF maintains full editorial management over all of its coverage evaluation, polling, and journalism actions.
Strategies |
| Analyses of market shares and HHI (e.g., Figures 1 by 3) have been based mostly on RAND Hospital Knowledge. RAND Hospital Knowledge are a cleaned and processed model of annual price experiences that Medicare-certified hospitals are required to undergo the federal authorities. Though restricted to Medicare-certified hospitals, in 2022, our evaluation of RAND knowledge included the overwhelming majority (97%) of non-federal basic medical and surgical hospitals in US metropolitan areas included in our evaluation of the AHA Annual Survey Database (see under). Price experiences have been assigned to years based mostly on the top of the reporting interval and have been scaled up or right down to mirror a 365-day interval, as mandatory.
Analyses of market shares and HHI have been restricted to non-federal, basic short-term hospitals. Market shares have been calculated because the share of inpatient discharges in an MSA that occurred inside a given well being system or unbiased hospital. One % of hospitals that met our different pattern restrictions had lacking values for inpatient discharges and have been excluded. Hospitals have been grouped into well being programs, as relevant, based mostly on the 2022 AHRQ Compendium of US Well being Techniques. MSAs mirror 2023 geographic definitions from the Census Bureau calculated based mostly on knowledge from the 2020 decennial census. HHIs have been calculated because the sum of squared market shares for all well being programs in a given MSA (e.g., an MSA divided evenly between two programs would have an HHI of fifty2 + 502 = 5,000). We obtained 2022 MSA inhabitants estimates from the Census Bureau. We used MSAs as a proxy for hospital markets, which is one approach utilized by different studies summarizing hospital market competitors throughout the nation. There are different methods of defining markets that may yield completely different outcomes when calculating the extent of competitors. For instance, one comparatively recent report additionally evaluated MSAs however centered on the place residents acquired their care, together with at hospitals exterior of a given MSA. As one other instance, some have outlined markets based mostly on Hospital Referral Areas (HRRs) and USDA Commuting Zones. Extra exact market definitions, corresponding to these used to outline competitors in antitrust instances, weren’t possible. This examine didn’t exclude MSAs with populations of no less than three million as some others have carried out, as a result of the evaluation sought to explain competitors throughout all metropolitan areas. Analyses of the share of hospitals affiliated with programs are based mostly on the AHA Annual Survey Database, which incorporates its personal measure of system affiliation. We restricted this evaluation to nonfederal, basic medical and surgical hospitals. Hospitals have been designated as rural in the event that they have been positioned in a ZIP code that’s eligible for Rural Well being Grants by the Federal Workplace of Rural Well being Applications. |
