Provider consolidation may increase costs, cut quality, researchers tell lawmakers

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Rising consolidation among healthcare providers, systems and insurers may be causing healthcare costs to rise while care quality suffers, according to a report published last week.

The report, assembled by researchers at Carnegie Mellon University and the Center for Health Policy at the Brookings Institution, warns lawmakers that more consolidation is looming, and change is needed to allow more competition in markets where one or two organizations dominate.

“A firm that dominates a market and faces little competition doesn't have to lower

prices or costs, push for better quality, or focus on innovation,” the report reads. “Since consolidation is hard to reverse, recent trends highlight the importance of moving quickly both to block consolidation that is not in the public interest.”

The report's authors propose both state and federal lawmakers undertake a “competition policy” for the healthcare industry that focuses on maintaining competition in healthcare markets, blocking anti-competitive practices, and encouraging new providers and payers to enter the fray.

Among the methods proposed to achieve those goals are:

  • Reforming Medicare policies that foster consolidation, including making payments site-neutral
  • Cutting down on the administrative burden imposed by value-based payments with a “roadmap for electronic quality reporting”
  • Having state insurance commissioners review contracts between insurers and providers

“Ensuring that markets function efficiently is central to an effective health system that provides high quality, accessible, and affordable care,” the paper reads. “There is an opportunity for political leadership and bipartisan support for policies that will make

markets work better.”