Tuesday, September 23, 2014

Healthcare Mergers: Cutting Waste or Creating Monopolies?

An excellent article, written by John Tozzi, appeared in Bloomberg Businessweek recently. Mr. Tozzi addresses an apparent paradox in current health policy, stating:
"To cut costs, healthcare providers are linking family practices and specialists with hospitals, rehabilitation centers, and outpatient clinics. The hope is that consolidating services will eliminate redundancies, reduce waste, and improve patient outcomes by making it easier for medical professionals to coordinate care-all objectives of the Affordable Care Act."

However, this "...is creating health systems so big they can dictate prices."
Anyone who took Principles of Economics knows that market power leads to pricing power. An equally important doctrine is this: Achieving scale lowers costs. For current health policy to work in lowering our national healthcare bill, regulators need to make sure that large health systems don't pocket these savings by overcharging. In other words, our health system appears to be evolving toward a network of heavily regulated monopolies akin to our electricity providers (FPL, Con Edison, JEA, Duke Energy etc.).

HERE to read the entire article.

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