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March 27, 2024

Report: CT hospital consolidations raised prices faster, but did not affect amount of care provided

PHOTO | JOE COOPER Connecticut's Legislative Office Building in Hartford.

Hospital mergers and consolidations in Connecticut have resulted in faster price growth and greater use of high-profit services, but little increase in the overall amount of care provided, according to a new report.

The Connecticut Hospital Association took issue with the report, questioning the data it relied on.

The report, dated March 26 and titled “Impacts of Connecticut Hospital and Health Care System Consolidation (2016-2021),” was produced by the Altarum Institute with assistance from and on behalf of the state Office of Health Strategy (OHS). 

Altarum, based in Ann Arbor, Michigan, is a nonprofit research and consulting organization that serves government health insurers, health foundations and other nonprofit clients that focus on health care.

The 41-page report was authorized by OHS under a state law that requires the agency to collect data to support creating a statewide healthcare facilities and services plan. It has been posted on the OHS website and was discussed during a meeting of the state’s Health Care Cabinet held Tuesday. 

The report looked at both of what it calls “horizontal consolidations” — one hospital system buying or affiliating with another — and “vertical consolidations” — when a hospital buys a physician group practice or hires individual physicians.

It analyzes hospital and healthcare system consolidation in Connecticut between 2013 and 2019, specifically looking at the effects on healthcare utilization, spending and prices from 2016-21, using data from state databases on hospital discharges and medical claims — the CT Hospital Discharge Database (HDD) and All-Payer Claims Database (APCD).

According to the report, from 2013 to 2019 there were nine horizontal consolidations in Connecticut:

  • 2013: Hartford HealthCare affiliates with William W. Backus Hospital in Norwich.
  • 2014: Trinity Health acquires St. Francis Hospital in Hartford
  • 2014: Western Connecticut Health Network — which included Danbury and New Mlford hospitals — affiliates with Norwalk Hospital
  • 2015: Trinity Health acquires St. Mary’s Hospital in Waterbury and Johnson Memorial Hospital in Stafford
  • 2015: Middlesex Hospital in Middletown joins Mayo Clinic’s network
  • 2016: Lawrence and Memorial Hospital in New London merges with Yale New Haven Health
  • 2017: Charlotte Hungerford Hospital in Torrington partners with Hartford HealthCare
  • 2019: HealthQuest and Western Connecticut Healthcare merge to create Nuvance Health
  • 2019: Hartford HealthCare acquires St. Vincent’s Medical Center in Bridgeport.

The report states that the consolidations have created less competition in local markets. 

“As such, less competition can result in increased healthcare costs and prices for consumers,” the report states. “Residents in affected regions also may have fewer independent choices for healthcare services. Additionally, patients who are uninsured, paying out-of-pocket, or have private insurance are often the most affected.”

According to the report, hospital consolidation from 2013-19 increased market power for hospitals and systems in seven of the nine affected Connecticut regions between 2016-21. 

“When hospitals and systems gained market power, the prices for healthcare services rose faster at those facilities compared to those whose market power did not increase,” the report states, adding that the faster price growth affected both inpatient and outpatient services.

Hospitals and health systems have been building and acquiring outpatient facilities over the past few years, stating that outpatient procedures reduce costs for both patients and hospitals. While that has proven to be true, the report suggests that hospital consolidations increase costs for outpatient services as quickly as they do for inpatient services.

The report cites two primary reasons for the higher prices: “1) moving care from physician offices to hospital facilities can cause new facility fees, and/or 2) hospitals can negotiate higher prices with insurance companies.”

The report does note that there is less of an impact on prices paid by public insurance (such as Medicare or Medicaid), because those prices are set by the government. 

The greater market power for hospitals affected by consolidations also served to increase the number of high-profit services utilized, including cardiac and musculoskeletal care, while the use of certain low-profit services, such as pregnancy/childbirth and behavioral healthcare services,  decreased at a faster rate, the report found.

It states that smaller differences “were observed in consolidating entities in the overall amount of care provided, average length of stay, the types of patients receiving care, and physician prices, providing evidence that consolidation did not substantially impact these outcomes.”

The report also found that hospitals affected by consolidation had comparatively better operating margin trends.

In presenting the findings, the authors note that the study has “several limitations,” including that it concerns just a five-year period, which is a relatively small sample, and that the period overlapped in part with the COVID-19 pandemic, which “disrupted and impacted health sector trends (e.g. overall spending, access, and utilization).” 

It added, “To produce the best study of consolidation impacts given the inherent limitations, we compared trends over time in consolidated versus non-consolidated hospitals. Even with this approach, other factors could have affected differences in the health economic trends between hospitals.”

In a statement emailed to Hartford Business Journal, the Connecticut Hospital Association said the report does not take into account the “underlying financial health” of the hospitals that seek affiliations or the reasons for the affiliations and mergers cited during the period studied.

The report, CHA said, “relies on a non-comprehensive data set from the APCD for certain findings and doesn’t recognize that in Connecticut, patients have many choices for healthcare that are not limited within the designated confines of the geographies used in the report.”

CHA’s statement noted that the report does show that “access to care and the amount of care received by patients was unaffected. The report also shows that low-income patients covered by Medicaid retained access to hospital services.”

The statement added that 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.”

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