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Consolidation of health plans may help lower hospital costs, study finds
Date:9/7/2011

Increased consolidation among health plans nationally may benefit consumers by lowering hospital prices, at least in those regions where health plans are the most consolidated, according to a new RAND Corporation study.

Researchers found that hospital prices were about 12 percent lower in the metropolitan areas with the fewest health plans, lending support to the view that when health plans become bigger they can negotiation lower prices from health providers.

The study, published in the September edition of the journal Health Affairs, also found that regions where hospital ownership is more consolidated generally have higher hospital prices. But those prices can be driven lower when health plans also are consolidated.

"There may be a benefit for consumers when health insurance plans are more consolidated because it tends to drive down hospital costs," said Glenn A. Melnick, an economist at RAND and the Blue Cross of California Chair in Health Care Finance at the USC School of Policy, Planning and Development. "As long as there is enough competition to keep health plans honest, the consolidation has a good result on prices."

Hospitals operators and physicians have expressed concern in recent years that the ongoing consolidation among health plans across the United States may concentrate so much market power in the insurance plans that they will be able to depress prices paid to health care providers.

Providers have suggested that such action could lower the quality of health services and limit the access of some people to health care. The American Medical Association has proposed that physicians be allowed to bargain collectively with health plans without fear of antitrust prosecution in order to "level the playing field" in price negotiations.

Researchers examined information about health plans, hospitals and health costs in metropolitan areas across the United States in 2001 and 2004 to determine
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Contact: Warren Robak
media@rand.org
310-451-6913
RAND Corporation
Source:Eurekalert

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