N.C. hospital monopolies driving cost of health care

North Carolina’s cities host some of the nation’s most monopolistic hospital markets. 

When it comes to giving patients’ choices in health care, North Carolina fares badly. Two of North Carolina’s cities — Durham and Greensboro — scored in the top five most monopolistic metro areas in the Health Care Cost Institute’s report.

This directly drives the cost of health care. Hospital consolidation is linked to sky-high medical prices, stagnant wages for doctors and nurses, and rising health care costs. 

“It means consumers will pay more for their health insurance. Hospitals are able to use market power if they have a lot of market share,” said Katherine Hempstead, Robert Wood Johnson Foundation senior policy adviser. “When they’re negotiating with plans, they’re able to extract higher rates. You can’t exclude them from the network if they own a lot of the available market.”

Over the past four years, Durham’s increase in hospital consolidation was almost 15 times higher than the benchmark that draws a Department of Justice investigation down on a proposed merger. 

None of North Carolina’s cities are in the clear. After ranking among the 50 least-competitive cities out of 112 metro areas, Winston-Salem and Raleigh were coded orange, while Durham and Greensboro merited a deep red — meaning that hospital systems have a vice-grip on the market, and that competition is languishing. 

“Increasingly concentrated hospital markets have been linked to the rising cost of hospital care by nearly every expert in the field,” Niall Brennan, president and CEO of HCCI, said in a statement.

The report dropped weeks after the state treasurer lost his fight with the hospital systems over the cost of the state health plan. In the verbal fireworks, the treasurer blasted the hospital systems as a monopolistic cartel, while the State Employees Association of N.C. tried to torpedo the reputations of Vidant and Cone Health’s CEOs. 

But North Carolina is hardly alone. Almost three-fourths of the metro areas studied qualified as highly concentrated, or trending toward monopolistic levels of control.    

“That’s the most striking finding. It’s something that is almost ubiquitous across the country,” said William Johnson, Health Care Cost Institute senior researcher. “And it’s something that is known to have potentially adverse outcomes on a whole number of things, including prices and health care costs.”

The American Hospital Association has defended mergers, dropping various reports that tout the economic benefits of consolidation. 

They say that consolidation gives physicians access to greater resources, improves care coordination, and preserves rural health care. They also lauded lower operating expenses, saying consolidation helps lower the cost of IT services, as well as shaving 1.5% to 3.5% off other operating costs.

“Mergers have become one of the critical means through which hospitals can provide their communities with high-quality, convenient and cost-effective care. Rick Pollack, AHA president and CEO, said in a statement. “The benefits of mergers allow hospitals to create connected networks of care and keep the focus where it belongs: on improving care for the patient.”

Most reports tell a different story, said Hempstead.

“Where hospital have market power, they tend to use it. It’s just economics,” said Hempstead. “Patients aren’t paying more because what they’re getting is worth more. They’re paying more because of hospitals’ market power.”

And patients are paying more — especially in Charlotte. Patients shelled out 15% more for health care in the Charlotte and Greensboro areas in 2016 than they did in 2012, even as patients’ use dropped across the board, according to another HCCI report. 

Charlotte’s cost of health care was particularly high. As the 16th most expensive metro area, Charlotte charged similar prices as New York City.

“It’s not that people are using more or that they’re getting more for their health care dollars, it appears to be the opposite,” Johnson said. “The fact of the matter is that health care prices have badly outpaced in inflation over pretty much any period that we’ve studied. … But we’re not getting more for what we’re spending.”

Patients in both Raleigh and Winston-Salem seem to have fared better, as they paid prices below the national median. But the HCCI wasn’t able to access data from Blue Cross Blue Shield, so the results may not reflect the total market, said Johnson. 

 “Among wealthy countries, the U.S. is an outlier when it comes to total health spending. But we don’t necessarily have improved health outcomes. Where does that gap come from? Not use, but higher prices,” said Rabah Kamal, Kaiser Family Foundation analyst. “There are certain areas that come up in terms of potential cost-cutting opportunities, like waste and errors, but in general, the price is the top difference.”