The ObamaCare fallacy: Bigger is better

The president’s health care law contains rafts of new regulations, benchmarks, and taxes for providers to deal with. Since these limit profit margins and create new administrative costs, they make it very appealing for health care providers to merge into gigantic, sprawling systems of care. A recent report in The Washington Post noted, “The health care industry is increasingly turning to consolidation as a way to cope with smaller profit margins and higher compliance costs that many anticipate when the federal government’s health care reforms under [Obama’s law] take effect.” Across the health care industry, we’re seeing the merger trend continue to rise.

These large mergers don’t actually translate to better care or to savings for patients. The Wall Street Journal recently reported on a patient from Nevada whose echocardiogram bill came to $373 before a merger and then $1,605 after a merger. The same treatment, in the same office, by the same cardiologist, separated by just six months — but with a price point far higher because the provider had been purchased by a hospital system, allowing for a much higher price to be charged.

The larger a hospital system gets, the more monopolistic control it can exercise over a market, putting insurers over the table when it comes to negotiating rates. Obama’s law accelerates the process, giving these large entities even more incentive to merge through the creation of accountable care organizations (ACOs). These large health care entities will destroy any hope for competition in a marketplace, driving out or buying out independent doctors and extracting as much money as possible from taxpayer-funded entitlements and the privately insured.