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PwC Health Research Institute: One inflator of medical cost trend in 2019: Provider megamergers

One inflator of medical cost trend in 2019: Provider megamergers

PwC Health Research Institute
August 29, 2018

PwC’s Health Research Institute (HRI) projects a 6 percent medical cost trend in 2019, consistent with the 5.5-7 percent range of the previous five years. But employers continue to struggle to contain their employee coverage costs. Medical costs continue to grow, yet the workforce’s health and performance aren’t improving. Average labor productivity growth of 1.1 percent over the last 10 years falls far below the 2.3 percent average of the last seven decades, according to a report by the US Bureau of Labor Statistics.

HRI’s analysis measures anticipated medical cost trend in the employer-based market, which covers about half of non-elderly Americans, according to a report by Kaiser Family Foundation. Changes to government health insurance, including Medicare, Medicaid and plans sold on the public exchanges created by the Affordable Care Act (ACA), are not within this analysis’ scope.

HRI’s research points to three factors inflating medical cost trend in 2019. One of them is the proliferation of provider megamergers. HRI estimates that by 2019, 93 percent of most metropolitan hospital markets will be considered highly concentrated, according to an analysis of census data. In the short term, this trend likely will lead to higher prices for medical services in these markets as providers have more negotiating power with payers and increased expenses from integration. This will likely inflate medical cost trend for 2019.