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The Consequences of Healthcare Consolidation
2015-04-20
 
 

Published: Oct 6, 2015

By Peter Ubel MD

The Consequences of Healthcare Consolidation

The federal government is currently debating whether the big six health insurance companies in the U.S. will soon become the big four. Aetna and Humana have announced plans to merge, as have Anthem and Cigna. The American Hospital Association and the American Medical Association strongly oppose the mergers, saying they will reduce competition in consumer markets.

Meanwhile, healthcare provider groups continue to consolidate. Small hospitals either get swallowed up by larger ones or risk going out of business. The federal government even seems to be encouraging provider consolidation by establishing incentives for them to form accountable care organizations, or ACOs.

Standard economic theory holds that when firms gain too much market power, prices rise. Will that be the consequence of healthcare consolidation?

The short answer is: No one knows, because so much depends on the relative power of payers and providers in individual markets.


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