Hospital Mergers and Acquisitions Causes Cancer Costs to Rise
Hospital mergers and acquisitions caused spending on drug-based cancer treatments to rise by 34 percent between 2010 and 2013, researchers found.
- Although hospital mergers and acquisitions typically generate revenue for the healthcare system, they can also lead to increased medical costs –especially among commercially insured patients. In a recent report, researchers from the University of Chicago argue that hospital consolidations lead to a substantial rise in outpatient chemotherapy treatment costs.
After examining outpatient oncology provider consolidation from 2010 to 2013, researchers saw a 34 percent increase in the average per person annual spending on drug-based cancer treatment. They also saw a 23 percent increase in average per person price of treatment. They believed that spending increases were partly driven by price increases.
Between 2010 and 2011, there were significant increases in consolidation among outpatient oncology providers and hospitals and/or health systems, researchers said. However, consolidations have been on the rise since 2003. The increase between 2010 and 2011 lead to increases in spending on outpatient prescription drug-based cancer treatment.
“Our results suggest increased vertical provider consolidation results in increased inflation adjusted per person spending on outpatient prescription drug-based cancer treatment,” the researchers said. “Markets with more vertically consolidated providers spend statistically more on outpatient drug-based treatment compared to markets with less vertically consolidated provider groups.”
Researchers analyzed private health insurance claims data from the Health Care Cost Institute. Researchers specifically looked at changes in inflation adjusted cancer-specific chemotherapy related spending in markets with “increasing concentration of vertically integrated oncology practices,” the report said.
Researchers attributed increases in costs and spending partially on changes in the prices charged for treatment. This also includes facility fees that hospital outpatient departments charge payers. “These increases appear to concentrate in physician-administered chemotherapy, pharmacy dispensed chemotherapy, and chemotherapy administration that includes facility fees hospitals charge payers,” the researchers said.
However, researchers also noticed that there was only limited increases in per person spending and prices for office visits where doctors evaluated and managed the treatment of cancer patients.
They also explained how consolidations equate to higher levels of spending. “Consolidation may allow outpatient practices and/or hospitals to gain bargaining power in negotiations with insurers, pushing up prices and/or changing the mix of treatment provided to patients, leading to increased spending,” the researchers said.
The team also noted that consolidation also has the ability to reduce spending. They just didn’t see reductions. Consolidation can lead to the “identification and dissemination of best practices and reductions in the use of unnecessary care, resulting in reduced spending,” they said.
“The potential effects of medical provider consolidation on spending are likely disease-specific,” the report said. It’s also likely that the effects of consolidation are dependent on local area supply and demand of medical care.
Although health system consolidation is mainly expected to impact patients with commercial insurance, it’s also expected to have an effect on Medicare and Medicaid beneficiaries.
“The potential pricing and use impacts of medical consolidation will largely impact care among the commercially insured population, but may have important spillovers to state Medicaid beneficiaries and Medicare beneficiaries over time,” the report said.
For the study, researchers examined 356 cancer-care markets. They chose to focus on this area because “cancer is the second leading cause of national deaths. Also, spending on cancer treatment (specifically prescription-drug based treatment) appears to be outpacing spending on all other diseases,” the report said.
Prices of prescription-drug based treatment, such as chemotherapy, are under providers’ discretion because healthcare under patients’ medical insurance benefits is mainly paid through fee-for-service contracts, the report stated.
Overall, the study suggests that it may be more cost-effective for patients to get chemotherapy treatments at a community-based practice rather than a hospital or hospital-affiliated clinic.
Perhaps there are always winners and losers from hospital mergers. While a previous reports focuses on the benefits of hospital mergers and acquisitions, this study clearly shows a negative aspects. While hospitals’ experience increases in revenue from consolidations, some consumers get hit with higher costs.
The researchers argues that policy makers remained concerned about the impacts of hospital consolidations on patient’s wallets. Also, the researchers believed that policy makers should examine disease-specific assessments when trying to determine what kind of impact consolidations will have on consumers.
Dig Deeper:
- Merger Plan Includes Health Information Exchange Commitment
- Hospital Mergers, Acquisitions Bring Revenue Opportunities
