health policy
Author: Jeff Goldsmith
The health policy community is enthusiastic about hospital mergers. In a paper I recently criticized, the operating argument was that hospital mergers were a conspiracy to restrict trade, allowing hospitals to extract rents from helpless local employers and patients. This logic led directly to advocacy for hospital cost controls (generously funded by Arnold Venture Philanthropy) as the only way to limit this abuse of economic power.
As you might expect, the reality is a little different. The chart below, provided by healthcare data company Trilliant Health, shows that hospitals are truly powerless monopolies. It shows the correlation between hospital operating margin and market concentration in 2023. The hospital on the far right of the chart has 100% local market share.
Source: Trilliant Healthcare analysis of CMS HCRIS files (Hospital Cost Reporting), 2023
Do you see the correlation? Of course I don't.
According to Trilliant, Across 336 CBSAs (markets) where hospital services are “controlled by a single company,” hospitals have an average operating margin of -1.7%.This negative average operating margin does no Includes physician practice operating losses, which are not reported on hospital cost reports, so actual operating losses are likely much greater.
Jeff Goldsmith is a veteran healthcare futurist, President of Health Futures Inc and regular THCB contributor. this comes from him Personal substack
