Consolidation has a good motive behind it when an idea of such is conceived. The majority of companies that have merged in the past are today bigger and benefiting from the union.
However, this sort of alliance can come with an extra cost to customers who patronize such organizations. For instance, the situation of consolidation of healthcare organizations in California is one that has led to a hike in prices when accessing health care in the state.
A study jointly run by the University of California researchers and the RAND Corporation revealed that the increasing cost of health care in California is strongly linked to the consolidation among physician practice and hospitals in the state. The resulting consolidation is observed to have caused higher prices for primary care and specialty insurance premiums in the state.
The September 2018 edition of Health Affairs has a publication on the study. The study examined critically the consolidation of companies between 2010 and 2016 in the state of California.
The researchers analyzed about 71 million California medical claims across counties in the state between 2011 and 2016.
In the report, between 2010 and 2016, the percentage of doctors grew from 25% to 40% in the hospitals where they practice. This increase is attributed to the 12% increase in the ACA (Affordable Care Act) insurance premiums.
The 9% price increase for an outpatient visit to doctors in four major specialties of oncology, cardiology, radiology, and orthopedics is another reason given for this rise according to findings.
Primary care office consultation also got a 5% increase to add to the cost of health care in California. Insurance plans and consumers bear the brunt of the increase.
Reasons Behind The Consolidation
Many reasons can be attributed to why a doctor’s practice owned by a hospital or healthcare system charge higher fees in California.
One of these can be charges relating to building maintenance cost or facility charges.
Another is that physician or Doctor’s practice may want to consolidate with a bigger hospital to align with the bigger brand and have the ability to charge higher rates based on the bigger brand. It is a common practice that people will be willing to pay more for well-established brands.
Larger hospitals and healthcare systems also see gains in Consolidation practices. It affords them to have the larger share during price fixes with health insurers.
The Unique Nature Of California State
The state of California on the study of consolidation and increases in prices is a different one compared to other states where similar studies were carried out.
The study concluded that the California market is different and unique because the state setting is mostly rural and also has places that are highly populated urban areas.
The healthcare system of the state already has managed care with an appreciable high integration level. In addition, the supply of healthcare providers in the state is a little above the national average.
In the submission of the authors of the study, healthcare in California is put at a favorable position to benefit from the consolidation move.