by Brenée Goforth
Media Manager & Communications Associate, John Locke Foundation
This week, JLF’s Jordan Roberts published a research brief on a national report conducted by the Health Care Cost Institute and the Robert Wood Johnson Foundation. According to Roberts:
[the report takes] an in-depth look at the hospital markets in 112 of America’s largest metropolitan areas. The report is titled “Health Marketplace Index” and provides data on hospital prices, hospital use, and hospital concentration for each market in 2016.
Five of the metropolitan areas studied were in North Carolina: Charlotte, Durham-Chapel Hill, Greensboro, Raleigh, and Winston-Salem. Roberts breaks down their results. The hospital networks in all five metro areas were either “highly concentrated” or “very highly concentrated.” Roberts writes:
Hospital mergers and acquisitions are occurring all over the country, and federal and state policies encourage consolidation. Furthermore, research has clearly shown that fewer hospitals or hospital substitutes in a given market, the higher prices are for patients. This HCCI report indicates that not only does North Carolina have some of the most concentrated hospital markets in the country, but patients are also likely paying higher prices for services and higher insurance rates because of the lack of competition in markets around the state. Policies that encourage competition and a more responsive hospital market should be implemented to counter this trend.
Out of the five metro areas studied, Charlotte had the highest prices. The city ranks 11th highest in the 112 metros studied and the price was 18 percent above the study’s median. On the other hand, Durham-Chapel Hill had the lowest prices in North Carolina. This area ranked 88th highest in the study, and prices were 7 percent below the median. However, Durham-Chapel Hill’s usage was the highest. It ranked 8th out of 112 and was 25 percent above the median (see chart). Even though Greensboro was “very highly concentrated,” its prices and usage were right on the median for the study.
|Charlotte||Highly Concentrated||11/112||+ 18%||46/112||+ 6%|
|Durham-Chapel Hill||Very Highly Concentrated||88/112||– 7%||8/112||+ 25%|
|Greensboro||Very Highly Concentrated||56/112||+/- 0%||57/112||+/- 0%|
|Raleigh||Highly Concentrated||52/112||+ 1%||94/112||– 17%|
|Winston-Salem||Highly Concentrated||46/112||+ 4%||75/112||– 7%|
On the results, Roberts writes:
[T]here doesn’t seem to be a clear link between prices and usage. For example, Durham ranked 88th in prices but 8th in overall use. Charlotte was the 11th most expensive but ranked 46th in the same category. This tells us that other factors, such as the types of services provided, may be affecting the overall prices. Similarly, among all metros in the country, Baltimore was ranked lowest in prices but highest in use.
Finally, North Carolina is still a certificate of need (CON) state, which has a notable impact on the hospital markets in the state. Setting aside federal policies that encourage hospital use and consolidation, state laws sanction it. CON laws allow incumbent market participants to operate freely without competitors. This creates a distorted market that forces consumers to pay more for health services than they otherwise would. I suspect that the presence of CON in North Carolina contributed to the high rankings that North Carolina metros received on price or concentration.
Read the full brief here. Learn more about hospital consolidations here.