Better Solutions for Healthcare

Addressing Hospital Concentration and Rising Consolidation in the United States

The US health system in general, and the US hospital sector in particular, are largely market-based. Both public and private payers rely on competition between hospitals to drive quality. Hospitals compete with one another over prices and quality in order to attract commercially insured patients and to be included in insurers’ networks. Each year, hospitals and insurers negotiate over the structure and level of hospital payments. Unfortunately, mergers and acquisitions have led the US hospital sector to become concerningly concentrated, which is ultimately raising health spending and adversely impacting consumers.

The hospital sector is the largest driver of domestic health care spending. In 2018, the US hospital sector accounted for approximately a third of US health spending and 6% of gross domestic product (Centers for Medicare and Medicaid Services 2020), making it one of the largest sectors of the US economy. Moreover, patients must rely on the hospital sector when they are at their most vulnerable: during periods of acute illness, following major injuries, and during childbirth. As a result, having functioning hospital markets in the US is vital to the functioning of the health system.

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