Testimony: Excessive Government Reduces Competition in Health Care Markets

Michael F. CannonThis week I  testified before the Senate on hospital consolidation.As my co ‐​panelist and Carnegie‐​Mellon health economist Martin Gaynortestified, “the majority of hospital markets are highly concentrated, and many areas of the country are dominated by one or two large hospital systems with no close competitors.” According to one study, “90 percent of Metropolitan Statistical Areas (MSAs) were highly concentrated for hospitals.” And “ the largest health system has over 50 percent of the market in 62 percent of areas in the country (commuting zones).”Excessive or inefficient hospital consolidation is a  real problem. It reduces entry and competition, increases health care prices, and can reduce health care quality. Gaynor continues:One of our key findings is that hospitals that have fewer potential competitors nearby have substantially higher prices. For example, monopoly hospitals ’ prices are on average 12 percent higher than hospitals with 3 or more potential competitors nearby. The prices of hospitals who have one other nearby potential competitor are on average 7.3 percent higher. We also examine all hospital mergers in the United States over a five year period, and f ind that the average merger between two nearby hospitals (5 miles or closer) leads to a price increase of 6 percent. Further, our evidence shows that prices continue to rise for at least two years after the merger. Last, we find that hospitals that face fewer c...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs