Hospital consolidations and ‘nonprofit’ tax breaks are driving up medical costs
A return to competition is the cure.
Everybody talks about the cost of health care as if it is one single thing. But in our complicated system, many elements contribute to our health care affordability crisis, and some are bigger problems than others. Spending on hospital care accounted for 40% of the growth in national health spending between 2022 and 2024. And when the providers who set those rising prices consolidate their power, families, employers, and taxpayers get squeezed even more.
Over the past few decades, major hospital chains have merged with competing providers and become local monopolies. Since 1998, there have been nearly 1,600 mergers among these systems. It’s no surprise that the Federal Trade Commission now considers 90% of hospital markets highly concentrated.
If a hospital wants the legal privileges of being nonprofit, it should have to earn them every year.
And it’s not just large systems acquiring each other. They have gobbled up doctors’ offices too. Between 2013 and 2018, the share of hospital-owned physician practices more than doubled, and by 2020, more than half of physicians worked directly for a hospital or for a practice owned by one.
This is a problem because these big health systems then use that market power to charge more. Leading budget experts found that after a hospital buys a physician practice, the price of services such as MRI scans, drug infusions, and chemotherapy rises by two to three times their prior cost, and the overall price of health care services increases 14%. One patient saw the out-of-pocket expense of arthritis treatments rise over 1,000% after her outpatient clinic was acquired by a hospital. Despite these increased costs, government research has also shown that hospital mergers do not improve quality.
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