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An integrated healthcare system (IHS) is a set of organizations that provides for or arranges to provide coordinated and continuous service to a defined population. The IHS takes responsibility for that particular population's health status and outcome, both clinically and fiscally. An integrated healthcare system is a well-organized, well-coordinated, and collaborative network. The integrated delivery system is a network that connects different healthcare providers to deliver organized,...
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The Rise Of Cross-Market Hospital Systems And Their Market Power In The US.

Brent D Fulton1, Daniel R Arnold2, Jaime S King3

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Cross-market hospital systems are growing, increasing from 37 to 57 systems between 2009 and 2019. This trend raises concerns about potential price increases due to enhanced market power during negotiations with insurers.

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Area of Science:

  • Health economics
  • Healthcare market analysis
  • Antitrust and competition policy

Background:

  • Hospital consolidation within local markets is common, but consolidation across different geographic markets is less understood.
  • Economic theory suggests that cross-market hospital systems can increase prices by leveraging market power with common customers, like insurers.
  • Emerging evidence indicates that this cross-market consolidation is occurring and may impact healthcare pricing.

Purpose of the Study:

  • To analyze the trend of hospital systems operating across multiple geographic markets.
  • To quantify the increase in hospital systems with the potential to exert cross-market power.
  • To highlight the implications of this trend for healthcare competition and pricing.

Main Methods:

  • Utilized the American Hospital Association Annual Survey Database for analysis.
  • Defined hospital geographic markets using commuting zones to link employment areas.
  • Examined hospital system composition and merger/acquisition data between 1970 and 2019.

Main Results:

  • The proportion of US community hospitals in systems rose from 10% in 1970 to 67% in 2019 (3,436 hospitals in 368 systems).
  • In 2019, 59% of these systems (216) owned hospitals in multiple commuting zones.
  • Hospitals involved in mergers/acquisitions (2010-2019) were increasingly located in different commuting zones than the acquiring entity (55%).
  • The number of systems in urban commuting zones with potential for enhanced cross-market power grew by 54% (from 37 to 57) between 2009 and 2019.

Conclusions:

  • Cross-market hospital systems have significantly increased, with a 54% rise in those potentially wielding enhanced market power in urban areas from 2009 to 2019.
  • This expansion of cross-market hospital systems warrants scrutiny due to potential anticompetitive effects.
  • The findings suggest a need for closer examination of how these systems negotiate with insurers and influence healthcare prices.