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The Office of Health Strategy is warning that consolidation among hospitals in the state is driving up the price of medical care.
In a report released March 26, the office found that hospitals that saw “increased market power” through mergers or affiliations between 2013 and 2019 had substantially greater price increases when compared to other hospitals in Connecticut, a change that primarily affected patients with private insurance.
The report did not find any significant difference in patients’ ability to access care, regardless of insurance, or the length of time patients remained in the hospital.
The hospitals defined in the report as “gaining market power” by an acquisition or merger that decreased competition in a particular area saw prices more than double between 2016 and 2021, compared to other hospitals in the state. During that time period, the price that patients paid upon discharge increased 8.6% at hospitals affected by mergers compared to 4% percent at hospitals that were not.
When controlling for a particular diagnosis or diagnosis group, the price growth for inpatient services at hospitals affected by mergers was quadruple that of other hospitals — an increase of 8.3% in prices versus 2%, respectively.
According to the report, Hartford Healthcare has seen increased market power in multiple regions of the state over the last decade. The hospital system affiliated itself with William W. Backus Hospital in Norwich in 2013, formed a partnership with Charlotte Hungerford Hospital in Torrington in 2017 and acquired St. Vincent’s Medical Center in Bridgeport in 2019.
Trinity Healthcare also gained influence with its acquisition of St. Mary’s Hospital in Waterbury and Johnson Memorial Hospital in Enfield in 2015.
The analysis does not include the impact of other mergers that have happened since, including Yale-New Haven Health’s acquisition of Waterbury Hospital, Manchester Memorial Hospital and Rockville General Hospital, which was finalized last week.
The Connecticut Hospital Association criticized the Office of Health Strategy after the report was released, saying it failed to examine the reasons why the mergers or affiliations took place and the financial strain that some hospitals were under at the time.
“It also does not consider what would have happened if affiliations did not occur and financially strained providers were faced with closing down, rather than joining with another care provider, which would have enormous negative impact on preserving care in communities across the state,” the statement read.
Howard Forman, director of the MD/MBA Program at Yale and director of the Health Care Management Program at the Yale School of Public Health, told CT Examiner that the report’s findings were consistent with what’s known about the effect of price consolidation.
But Forman noted that some of the mergers had taken place “out of necessity” and that “the increased market power was probably the least bad outcome.”
“There are good arguments to be made that it would be bad for hospitals to close in some of these areas and that it’s less bad for them to be retained and then have prices basically go up,” he said.
Forman added that the public could demand more from the hospitals in response to the increased prices — requiring, for instance, improved outcomes, like having patients return to work more quickly or be less likely to be readmitted.
“Some things become more expensive because you’re taking a traditional gallbladder surgery and you’re now doing it with new equipment that allows people to recover faster. If we had cases like that and you were paying more for that, that might be worth it … but we’re not seeing that at this point. We’re really not seeing measurable changes that would suggest that the additional cost is worth it,” he said.
‘No margin, no mission’
The hospital association noted in its statement that patients maintained the same access to care regardless of the mergers, and that Medicaid patients could access care as well.
“The report is further evidence that state Medicaid rates don’t cover the cost of care, leaving hospitals to make up the difference through higher commercial payments, shifting cost to employees and employers,” the association wrote.
According to another report from the Office of Health Strategy regarding the benefit that communities derive from nonprofit hospitals, Medicaid shortfalls were at $1 billion in 2022. The hospital association contests that Medicaid and Medicare underpayments accounted for a $2.7 billion loss.
The March 26 report also found that hospitals affected by mergers experienced slower growth of less profitable services, notably in behavioral health and substance use disorder treatments, compared to similar hospitals in Connecticut. In contrast, these hospitals saw quicker growth in more lucrative services like cardiac care.
Even if hospitals provided services to uninsured populations, Forman explained, they would build new outpatient clinics in areas where patients could afford private insurance. He referred to this as “no margin, no mission.”
“Where is Hartford HealthCare building new centers? Where is Yale-New Haven building new centers? Where is Nuvance going to be building new centers? It’s always going to be in the richer suburbs. That’s where you put them,” he said.
If the state and the federal government invested more into Medicaid, Forman said, then more effort would be made to serve people on public assistance.
“It may sound immoral, but it’s the reality of the business that you have to be able to at least afford what you’re building,” he said..
Republican leadership and members of the Public Health Committee criticized the consolidations, saying they were “negatively impacting competition” and making it difficult for certain populations to access health care.
“We want our community hospitals to stay independent if possible or, if owned already by a large health care system, to stay open. We want to lower health care costs. We also want to protect the vital services, such as birthing centers [and] behavioral health programs, that our community and rural hospitals provide,” the statement read.
They noted that the state Legislature is currently drafting legislation to regulate hospitals.
State Sen. Matt Lesser, D-Middletown, co-chair of the Human Services Committee, also criticized the consolidations and said the study was a confirmation of what people already knew.
“The monopolization of health care that continues to grow unchecked in this state is stifling competition and resulting in higher prices for our residents. With the details in this report, I look forward to working with my colleagues to develop legislation to protect consumers and curb anti-competitive trends in the marketplace,” the statement read.
Gov. Ned Lamont did not respond to a request for comment.