Editor’s Note: The Robert Wood Johnson Foundation is playing an ever increasingly greater role in the war between hospitals and the insurance industry as noted in the following article. We also note that a number of economists specializing in healthcare often cite studies funded by the Robert Wood Johnson Foundation as their confirmatory source.
The following article demonstrates the need for an intervention by a regulatory watchdog to review the record and present its findings in an easily understandable form. Accordingly given the interest in this topic, and recognizing CRE’s limited resources, it will conduct a review of one of the Robert Wood Johnson Foundation studies and post the resultant analysis on this Interactive Public Docket (IPD) on Sept 16.
CRE acting in its watchdog capacity provides all affected parties the opportunity to comment on its work by using one of two comment mechanisms provided on this page: (1) use the comment link at the bottom of this post, or (2) post a new comment using the mechanism to the right of this article. Posts can be made anonymously and without registering.
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“The consideration and ultimate acceptance of the material on an IPD by federal regulators and their regulatory overseers depends in large part on the recognized regulatory expertise and federal credentials of the managers of the organization which hosts the IPD.”
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Critics: Big hospitals mean bigger costs to consumers
August 22, 2013
Critics of major hospital mergers say they have a history of driving up health care costs, as big health systems use their marketplace leverage to get higher rates from insurers.
“An increase in (hospital) consolidation leads to an increase in prices,” said Sujoy Chakravarty, a professor at the Rutgers Center for State Health Policy.
Chakravarty cited a 2012 research analysis by the Robert Wood Johnson Foundation that concluded hospital consolidation generally results in higher prices.
“And those increases in prices will ultimately translate into increases in premiums for consumers,” he said.
That’s a viewpoint David Knowlton, president of the New Jersey Health Care Quality Institute, can appreciate.
“Can hospitals do wonderful things by combining, can they spread the administrative burden and save money? Absolutely,” he said.
But, he said, mergers become anticompetitive if the big health care system says to the insurer: “We won’t negotiate unless you meet our terms, because we’ve sucked up most of the covered lives” in a particular territory.
“It is hard to find the proper balance,” he said.
Ward Sanders, president of the health insurer trade group the New Jersey Association of Health Plans, said the efficiencies of larger health care systems are overshadowed by higher prices. “Plans and consumers want to pay based on value and quality, not the size of the entity or the volume of procedures,” he said.
Princeton University professor Uwe Reinhardt, a leading health care economist, said hospitals should face limits on price increases. Specifically, he’d tie increases to the consumer price index for at least five years.
“Every hospital consolidation that has ever been proposed has been justified on the grounds that it will increase efficiency, lower the cost of producing hospital care and therefore lower prices, or keep them in check,” Reinhardt said. “Yet a huge body econometric literature suggests that other things being equal, hospital consolidation has pushed up the prices hospitals charge.”
Barry Ostrowsky, chief executive of New Jersey’s largest hospital system, Barnabas Health, said, “The conventional theory has been if you become big, then you have greater leverage in negotiating with insurance companies.”
But if that’s true, he added, “it’s more in the past than it will be in the future.”
“I think it’s clear that insurance companies or anyone else that finances health care are looking to reduce reimbursements for services, and they are looking to insist that providers of health care are as efficient as they can be,” Ostrowsky said.