Who’s increasing health care costs? Not us!

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Determining who is responsible for the increase in health care cost in the United States has seemingly limitless possibilities. There are enough culprits to go around, but a recent analysis points a finger at hospital-based care (Health Aff. 2019 Feb;38[2]:184-9).

Dr. Sidney Goldstein is professor of medicine at Wayne State University and the division head emeritus of cardiovascular medicine at Henry Ford Hospital, both in Detroit.

Dr. Sidney Goldstein

The authors of the paper found that, during the period from 2007 to 2014, inpatient hospital care for surgical procedures increased 42% and outpatient hospital care increased 25%. In the same period, physician care increased only 6%. Much of this increase in hospital costs was associated with hospital consolidations and mergers.

We have been led to believe that hospital mergers will cut costs by eliminating duplication of both physical and personnel overhead costs. In fact that doesn’t seem to happen. It appears that hospital mergers were associated with increased per patient costs and is a result of decrease in competition in local health care markets. This observation has been made in the past (Am Econ Rev. 2015 Jan;105:172-203), and was reiterated by the most recent report. If there were decreases in overhead observed in the mergers, they were not passed on to the patients or insurers.

There was a time when community hospitals, large and small, were run by community leaders and local doctors, often under the aegis of religious and social groups. I can remember the medical and community leadership in Utica, N.Y., where I grew up and where I worked in a hospital as a summer intern. Their goal was to provide quality health care. The financial success or failures of the hospitals were the responsibility of the local community, and the profits and losses were kept at a minimum.

Fast forward to the 21st century and health care in general, and hospital care in particular, has become a “cash cow.” Community leadership has been minimized, and where it exists, it is under constant pressure to make a profit. Hospital mergers, arranged under the guise of economy of size, are now controlled by hedge funds and large health care corporations.

The community board of trustees has been replaced by investors, whose main concern is the return on their investments regardless of quality of care or need. If those profits fail to materialize, the hospitals are taken over by another investor group. So much for quality. As the corporations grow, they buy up the competition, particularly small community hospitals leaving many, particularly in rural America, without medical support.

There seems to be little recourse to consumers or insurers to mitigate this process. Investors have a right to a return on their investment, but until we have governmental control of competition, that incentive remains. We can see similar price increases in the pharmaceutical marketplace, where Congress has limited competition to preserve the drug monopoly. Americans will be asked to pay more to maintain a system that is inherently on the road to bankruptcy and fails to provide either quality or fair drug and hospital charges.

But what do we care, we can afford it.

Dr. Goldstein is professor of medicine at Wayne State University and the division head emeritus of cardiovascular medicine at Henry Ford Hospital, both in Detroit.

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