National experts say hospital mergers contribute to Indiana’s high health care costs

Hospital mergers and consolidations that limit competition are driving Indiana’s high health care costs. That’s according to national experts who spoke at the Health Care Cost Oversight Task Force's meeting. They recommend lawmakers consider legislation focused on reviewing potential mergers and addressing the impacts of mergers that have already happened.

Hospitals in Indiana that merged had inpatient prices about 13 percent higher than hospitals that did not merge.

Maureen-Hensley Quinn, a senior program director at the National Academy for State Health Policy, said smaller practices acquired by a hospital could increase costs for patients through additional fees and referrals to a hospital campus.

“Usually after consolidation happens, providers will drive patients to a hospital campus, given just the referral nature,” Quinn said. “And then those services are more expensive because they are provided on a hospital campus.”

Brent Fulton is the director of the Nicholas C. Petris Center on Health Care Markets and Consumer Welfare at the University of California Berkeley. He said Indiana has a history of not challenging mergers that limit competition.

“You want to strike a balance,” Fulton said. “But in Indiana, it seems like there's been under-enforcement.”

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Fulton said other states have created ways to review potential mergers to evaluate the impact they could have on the market. However, Indiana’s markets are already heavily consolidated.

“It's very hard to unwind a merger that's already occurred,” Fulton said.

In a 2022 study, Fulton and other researchers found Indiana’s health care markets were dominated by national insurers and major hospital systems. A large portion of the health care market in the state is dominated by just six systems — two national and four state systems.

Fulton said it’s difficult for people to enter a highly consolidated market to create more competition.

“Even though markets are currently concentrated, you can have entry into those markets, an entry will occur if there's positive economic profits, high prices, low quality that will often induce entry,” Fulton said. “But you've got to make sure that there aren't barriers to entry.”

Fulton said there are policy options to mitigate the impact of a consolidated market. His recommendations include restricting anti-competitive contracting, increasing price transparency, and instituting hospital rate regulation.

The last meeting of the task force is scheduled for Nov. 13.

Abigail is our health reporter. Contact them at aruhman@wboi.org.

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