Improving Value

Strategies to Address the Negative Effects of Healthcare Consolidation

Competition in healthcare, while increasingly rare, helps control prices, encourages the delivery of high-quality products and services and promotes consumer choice. However, antitrust laws designed to preserve competition have been largely ineffective since the 1990s, and persistent consolidation among providers and insurers has contributed to high (and rising) healthcare costs. As a result, states have relied upon alternative approaches to mitigate anti-competitive effects after mergers occur. 

Current Evidence on Healthcare Consolidation

Healthcare organizations typically argue that mergers improve efficiency and create economies-of-scale, improving quality and reducing costs. Yet little reliable evidence supports this claim. In fact, ample evidence demonstrates that healthcare mergers increase prices and that less competition leads to lower quality., Mergers may also negatively affect other important aspects of the healthcare system, such as the healthcare workforce, health systems’ responsiveness to community concerns and access to care.

State Options to Preserve or Increase Competition in Consolidated Markets

States can hold healthcare organizations accountable for delivering promised benefits by placing conditions on mergers designed to improve affordability, expand access, improve quality or reduce complexity. For example, some states have prohibited insurers from financing the cost of mergers by raising premiums. Others have required organizations to invest in consumer assistance programs, infrastructure development and quality improvement initiatives. Specific examples of these requirements are provided in Tables 1-4 (below, from Easy Explainer No. 16). 

Alternatively, some states (including Tennessee, Virginia and North Carolina) have attempted to mitigate harmful effects of consolidation by issuing certificates of public advantage – legal agreements in which states exempt organizations from antitrust scrutiny in return for commitments to make public benefit investments and control healthcare cost growth. Evidence is emerging on the effectiveness of this strategy, however, a study of North Carolina’s experience documented substantial risks. 

Other strategies that states can pursue to restore competition in consolidated markets include:,

  • Strengthening community benefit requirements for nonprofit hospitals as a condition of their tax exemption;
  • Establishing “any willing provider” laws that require insurers to contract with all interested providers (thereby reducing the bargaining power of insurers);
  • Establishing “any willing insurer” laws that require providers to contract with any willing insurer (thereby reducing the bargaining power of providers); and
  • Increasing regulation/oversight through price caps or arbitration.

Strategies to Prevent Future Consolidation

A 2017 study by The Commonwealth Fund revealed that 90 percent of provider markets and 60 percent of insurer markets were either highly or super-concentrated as of 2016. To prevent further consolidation, states should consider:

  • Establishing/strengthening antitrust laws pertaining to horizontal mergers, vertical mergers and anti-competitive practices; and 
  • Examining state-level regulatory burdens that increase costs associated with compliance (further incentivizing providers to consolidate).


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