More Evidence of the Association Between Hospital Market Concentration and Higher Prices and Profits

By: James C. Robinson, PhD, Leonard D. Schaeffer Professor of Health Economics and Director, Berkeley Center for Health Technology, University of California, Berkeley

In this essay, Dr. James Robinson presents results from his latest work showing that the prices hospitals charge to private insurers for 6 common procedures are 30 to 50 percent higher when the hospital is located in a market where it faces less competition from other hospitals. These findings add to the already substantial body of research showing that consolidation in hospital markets confers market power that enables hospitals to secure higher prices. When seen in the context of current policies encouraging additional provider consolidation through accountable care organizations, this work serves as an important reminder that ongoing vigilance of the potential anti-competitive effects of these new delivery systems is needed along with other measures to counteract growing market power of providers.