The Medicare Payment Advisory Commission yesterday discussed how health care provider consolidation affects prices, costs and Medicare payments, among other areas. In 2018, the chairman of the House Committee on Energy and Commerce asked MedPAC to report on a series of questions on the effects of hospital mergers and physician-hospital consolidation.
In addition to concerns raised about how MedPAC staff calculated market concentration, during yesterday’s discussion several commissioners urged MedPAC staff to examine how consolidation among hospitals correlates with consolidation among other stakeholders, including health insurers, pharmacy benefit managers and group purchasing organizations, in order to assess impacts in the context of larger health care environment dynamics. The commissioners also challenged some staff conclusions that federal policy does not create incentives for consolidation, noting Medicare underpayments and electronic health record requirements as possible drivers. Several commissioners called for a broader view of policies that may be influencing mergers and acquisitions, both directly and indirectly.
The report on consolidation is expected to be included in MedPAC’s March report to Congress.
A Charles River Associates study ( released by the AHA in September found that hospital mergers can lead to enhanced quality through the standardization of clinical best practices, as evidenced by significant declines in the rates of readmission and mortality rates following mergers. In addition, it found mergers decrease costs and are associated with a statistically significant 2.3% reduction in annual operating expenses, and revenues per admission at acquired hospitals declined by a statistically significant 3.5% relative to non-merging hospitals, suggesting that “savings that accrue to merging hospitals are passed on to patients and their health plans.”
Other topics discussed at yesterday and today’s MedPAC meeting included increasing the supply of primary care physicians; redesigning the Medicare Advantage quality bonus program; reforming the benchmarks in the MA payment system; restructuring Medicare Part D for plans serving low-income beneficiaries; and post-acute care spending under the Medicare Shared Savings Program.

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