Skip to main content
Sister Publication Links
  • ESG: THE NEW IMPERATIVE
Subscribe
  • Sign Up Free
  • Login
  • Subscribe
  • News
    • Current News
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Transformation
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Digital Health
  • Insights
    • ACA 10 Years After
    • Best Practices
    • Special Reports
    • Innovations
  • Opinion
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
  • Events & Awards
    • Awards
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Excellence in Governance
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Diversity in Healthcare
      • - Luminaries
      • - Top 25 Diversity Leaders
      • - Leaders to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Digital Health Transformation Summit
    • ESG: The Implementation Imperative Summit
    • Leadership Symposium
    • Social Determinants of Health Symposium
    • Women Leaders in Healthcare Conference
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Diversity Leaders Gala
    • Top 25 Women Leaders Gala
    • - Hospital of the Future
    • - Value Based Care
    • - Supply Chain
    • - Hospital at Home
    • - Workplace of the Future
    • - Digital Health
    • - Future of Staffing
    • - Hospital of the Future (Fall)
  • Multimedia
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
  • Data Center
    • Data Center Home
    • Hospital Financials
    • Staffing & Compensation
    • Quality & Safety
    • Mergers & Acquisitions
    • Data Archive
    • Resource Guide: By the Numbers
    • Surveys
    • Data Points
  • MORE +
    • Contact Us
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Healthcare Economics
September 30, 2019 04:01 PM

Indiana's anticompetitive market inflates costs, report says

Alex Kacik
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    Not-for-profit healthcare providers dominate the Indiana market, creating an anticompetitive dynamic that has driven higher-than-average healthcare spending, according to a new study.

    Households in the most concentrated healthcare markets pay more than double per procedure compared with those in the most competitive markets, a new policy brief from Ball State University's Center for Business and Economic Research shows.

    In the most lopsided market, where there are roughly 0.12 unaffiliated hospitals per 100,000 residents, the average cost of outpatient services range between 3.65 and 4.43 times the Medicaid reimbursement rate, according to the preliminary analysis of Indiana's 17 Affordable Care Act market regions that used RAND Corp. pricing data and data from not-for-profit hospitals' Form 990s. In the most competitive markets, where there are 2.25 unaffiliated hospitals per 100,000 residents, the average outpatient services cost between 1.57 and 3.08 times the Medicaid reimbursement rate.

    This lack of competition seems most acute in metropolitan markets rather than rural areas, said Michael Hicks, lead author of the study and director of Ball State's Center for Business and Economic Research and an economics professor. He noted that Fort Wayne, South Bend, Evansville and other metros face more concentrated markets than more rural areas.

    "The monopolization problem linked to the holdings of not-for-profits and the competitive advantage they receive through the not-for-profit designation is problematic," Hicks said.

    Profits, or what the institutions refer to as excess revenue over expenses, in Indiana's most concentrated markets averaged $82 million, while profits in the least concentrated markets averaged $2.3 million, according to the study. All told, not-for-profit hospitals in Indiana collected more than $1.78 billion in profits in 2015.

    Meanwhile, healthcare costs for Indiana residents have far outpaced other costs over a 20-year span, rising from $4,207 a year in inflation-adjusted dollars in 1997 to $7,962 in 2017. The typical Hoosier spends 4.4% more of their annual income on healthcare than the average American, according to federal data.

    An Indiana resident paid $330 less than the national average for healthcare in 1997; that individual paid $819 more than the national average in 2017. Concurrently, outcomes have lagged, suggesting access obstacles, Hicks said.

    Some of the limitations of the study include a lack of robust data to conduct a full test across all inpatient services as well as partial sub-state data on personal consumption expenditures.

    The Indiana Hospital Association said that much of the data is flawed. The profit calculations factor in all of Ascension's cash reserves and investments, which isn't a fair portrayal since Ascension is national in scope, said Brian Tabor, IHA president. The profit margins are quantified using 990 data, which is often unverified and inaccurate, he said. As a whole, Indiana is quite competitive, Tabor maintained. A related Health Care Cost Institute analysis found that the Indianapolis area was only moderately concentrated.

    "We all know that the current trajectory of healthcare spending is unsustainable. Our members are working hard at bending the cost curve and at the same time maintain their commitment to improve access and provide high-quality care, and when we have an analysis that misses the mark, it is not helpful in getting the conversation where it needs to go," said Tabor, adding that he also took exception with some of the "flawed" recommendations that would ultimately pull resources from the community.

    The study joins a growing compendium of research linking less competition to higher prices. A related national analysis found that prices at monopoly hospitals were 12% higher than those in markets with four or more rivals. Mergers in concentrated markets often lead to price increases in the range of 20% to 30%, and can surge up to 50%, experts said.

    Hospital associations and executives counter that costs will be held down over the long run due to efficiencies of scale.

    Within Indiana, Hicks noted in the study, market concentration appears strongly correlated with an organization's size, suggesting that the negative impact of market power, not the benefit of scale economies, influence pricing.

    Looking ahead, the ongoing trend of hospitals, health systems and other providers joining forces is not expected to slow.

    "It is very rare that markets have seen greater efficiencies (following hospital mergers) and that those have been passed onto the consumer," said Fred Bentley, managing director at Avalere Health. Bentley noted that the study didn't address health insurer consolidation, which has a significant impact on pricing.

    To restore competition, Hicks recommended beefing up antitrust enforcement, ending certificate of need and local non-compete clauses, and unraveling mergers. Profitable not-for-profit providers should be taxed at rates consistent with the private sector. At minimum, investments should be more restricted, he said.

    The not-for-profit market conditions in Indiana have failed to sustain competition and must be incentivized to refrain from anticompetitive practices, Hicks said.

    "There is intentional complexity on this issue that is benefiting the hospitals and their capacity to mysteriously price services," he said.

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    pay health equity
    'Bias is profitable': Health disparities may cost $1T by 2040
    doc-businessman-handshake-purple_i.png
    Study: Private equity linked to higher anesthesia costs
    Most Popular
    1
    More healthcare organizations at risk of credit default, Moody's says
    2
    Centene fills out senior executive team with new president, COO
    3
    SCAN, CareOregon plan to merge into the HealthRight Group
    4
    Blue Cross Blue Shield of Michigan unveils big push that lets physicians take on risk, reap rewards
    5
    Bright Health weighs reverse stock split as delisting looms
    Sponsored Content
    Daily Finance Newsletter: Sign up to receive daily news and data that has a direct impact on the business and financing of healthcare.
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Digital Health
    • Insights
      • ACA 10 Years After
      • Best Practices
      • Special Reports
      • Innovations
    • Opinion
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Events & Awards
      • Awards
        • Nominate/Eligibility
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Excellence in Governance
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top 25 Innovators
        • Diversity in Healthcare
          • - Luminaries
          • - Top 25 Diversity Leaders
          • - Leaders to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Conferences
        • Digital Health Transformation Summit
        • ESG: The Implementation Imperative Summit
        • Leadership Symposium
        • Social Determinants of Health Symposium
        • Women Leaders in Healthcare Conference
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Diversity Leaders Gala
        • Top 25 Women Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Supply Chain
        • - Hospital at Home
        • - Workplace of the Future
        • - Digital Health
        • - Future of Staffing
        • - Hospital of the Future (Fall)
      • Webinars
    • Multimedia
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • Data Center
      • Data Center Home
      • Hospital Financials
      • Staffing & Compensation
      • Quality & Safety
      • Mergers & Acquisitions
      • Data Archive
      • Resource Guide: By the Numbers
      • Surveys
      • Data Points
    • MORE +
      • Contact Us
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing