An insurance industry analysis projects medical inflation of more than 2 percent through the end of 2019, chiefly because of improved treatment quantity driven by hospital consolidation.
What that means for Florida’s workers’ compensation system remains unclear, according to a briefing paper, “The Impact of Hospital Consolidation on Medical Costs,” published by the National Council on Compensation Insurance, or NCCI.
The organization, which in Florida proposes workers’ compensation insurance premium levels to state regulators, plans additional study into that question.
“Impacts of hospital concentration have been estimated for commercial health insurance and Medicare, which can help explain the effect on workers compensation even though the types of care are different,” the document says.
“It is likely that the price of inpatient services for workers compensation is higher in highly concentrated markets and, like Medicare, that higher quantities of medical services are provided.”
Medical inflation ran at 1.4 percent in 2017.
The briefing paper attributes the trend to “a second wave” of hospital consolidation beginning around 2010. The field experience 55 deals on average between 2002 and 2009, increasing to 93 by 2011. By 2017, the number has increased to 115, and thus far in 2018 to 30.
Hospital concentration increases prices paid by commercial insurers, the paper says, at rates ranging from a high of 40 percent to a low of 6 percent, depending on methodology.
“Advocates of hospital mergers, particularly the merging hospitals themselves, emphasize efficiency and scale advantages such as those described above,” the paper says.
“However, research to date on completed hospital mergers has yet to demonstrate the benefits of consolidation via improved quality, access, and cost.
“Mergers increase the likelihood of intensive surgery and total number of surgeries, but do not improve patient outcomes. Mergers have also been found to reduce hospital costs per risk-adjusted discharge, but not to reduce the price of hospital care to insurers.”
Under Medicare, hospital concentration increases costs by boosting the quantity of care delivered, the document says.
In concentrated markets, patients are more likely to be discharged to a post-acute facility instead of home, and to undergo inpatient rather than outpatient surgery.
However, Medicare patients in less concentrated markets receive fewer services.
“This result is not surprising, since more concentrated hospital systems have a greater ability to provide intensive high-fee services in-house, rather than referring them out,” the paper says.