Hospital Field Realignment Not Driving High Premium Increases

Features of the Patient Protection and Affordable Care Act (ACA) and other market trends are driving a major realignment of the health care system.  Hospitals are strengthening ties to each other and physicians in an effort to respond to new global and fixed payment schemes as well as incentives for improved quality and efficiency, implementation of electronic medical records and care that is more coordinated across the continuum.  Much of this realignment involves mergers and acquisitions.  Health insurance plans are claiming that consolidation in the hospital field is leading to higher prices, which, in turn, will drive higher premium growth.  These allegations are completely inconsistent with data showing spending and price growth at record lows.

Supporting Resources

VHHA comments to State Corporation Commission for May 25, 2016 hearing on Anthem/Cigna transaction

May 25, 2016 Missouri Dept of Insurance order prohibiting Aetna from getting license to sell MA products in Missouri

AHA letter to the Department of Justice (DOJ) March 1, 2016
AHA letter to the Department of Justice (DOJ) raising concerns about the proposed Anthem acquisition of Cigna focusing on the impact of Anthem’s affiliation with the Blue Cross Blue Shield System.

How Hospital Mergers and Acquisitions Benefit Communities
A new study by the Center for Healthcare Economics and Policy.

Insurance premiums continue to outpace hospital price growth
Data from the Kaiser employer health benefits survey and the Bureau of Labor Statistics indicate that growth in hospital prices has lagged behind growth in premium levels and continues to decline.

Projections of High Premium Increases at Odds with Low Growth in Health Spending
Many insurers are signaling high premium increases for 2014, claiming increased medical costs and merger activity as the primary culprits. However recent data indicate that health care spending growth is at historic lows.  Hospitals are contributing to this trend, with price and cost growth at their lowest rates in more than a decade. But premium increases have exceeded both overall and hospital growth trends over the past decade. 

Health spending begins fifth consecutive year of moderate growth
Research from the Altarum Institute finds that health spending has begun its fifth consecutive year of record low growth.

Health care price growth lowest since December 1997
Altarum research also finds that health care price growth is at its lowest level in more than a decade.

Deficit Projections Fall as Slower Growth in Health Care Costs Persists
Recently released figures from the Congressional Budget Office find that the sharp and persistent slowdown in the growth of health care spending is narrowing the deficit.  A New York Times article describes this trend.

Hospitals:  The Changing Landscape is Good for Patients & Health Care
Hospital merger/acquisition activity began to accelerate because of market trends and the ACA.  Both government and the private sector are creating incentives that are driving hospitals toward one another and toward their medical staffs, with new global and fixed payments and new incentives for meeting quality, efficiency and patient satisfaction goals.  Even as some payers blame hospital mergers for higher premiums, growth in spending on hospital care is at historic lows.

Fundamental Transformation of the Hospital Field
Current market trends are transforming the health care field, driving an urgent need for capital investments and economies of scale.  For many hospitals – particularly stand-alone hospitals – merging with another hospital or system may be the only hope for remaining competitive in the future. Mergers allow hospitals to respond more effectively to rapidly changing market forces, including: (1) reimbursement reductions and changes, (2) the need to implement robust electronic health records systems, and (3) limited access to capital.



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