Trends in provider consolidation

Trends in provider consolidation


A policy paper by the HHS describing proposals to promote choice and competition in health care. Before getting into policy recommendations, however, it outlines how increased provider consolidation has lead to less choice.

One recent study by Gaynor et al. …found that the mean HHI [Herfindahl-Hirschman Index] across MSAs in the inpatient hospital industry increased from 2,370 in 1987 to 3,261 in 2006—an increase of more than 900 points. It also found that most of this increase had occurred by the year 2000

Physicians also have been consolidating. While the trend is not a severe as in inpatient hospital care, it is happening, but market concentration does vary across specialties. One study found that:

…median two firm concentration ratios (CR2) across all
areas of 33 percent for primary care
services, but 58 percent for cardiology,
72 percent for oncology, 49 percent for
orthopedics, and 57 percent for
radiology. Similarly, it found a median
HHI of 761 for primary care services,
but 2,370 for cardiology, 3,606 for
oncology, 1,751 for orthopedics, and
2,190 for radiology.

In particular, large hospital groups have been buying medical practices and more MDs are working for large hospital groups than ever before. Market concentration, however, not only varies across geography but also by physician specialty. One study found that:

…median two firm concentration ratios (CR2) across all areas of 33 percent for primary care
services, but 58 percent for cardiology, 72 percent for oncology, 49 percent for orthopedics, and 57 percent for radiology. Similarly, it found a median HHI of 761 for primary care services,
but 2,370 for cardiology, 3,606 for oncology, 1,751 for orthopedics, and 2,190 for radiology.



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