How has hospital consolidation affected the price and quality of hospital care?

Abstract

During the 1990s, the hospital industry was transformed by mergers and acquisitions. This synthesis looks at why this rapid consolidation occurred and what impact it had on the price and quality for patients, and the cost of care for hospitals. Key findings include: Managed care was not a main driver of consolidation, but fear of managed care may have played a part. Other factors, including technological advances that reduced inpatient demand, and an antitrust environment that was receptive to consolidation contributed to consolidation. Research suggests hospital prices increased by 5 percent or more as a result of consolidation. When two hospitals merge, not only does the surviving hospital raise prices but so do its competitors. Evidence of the impact of consolidation on quality of care is limited and mixed, but the strongest studies show a reduction in quality. Hospital consolidation does modestly reduce the cost to hospitals of providing care.