What Does Hospital Consolidation Mean for the Price of Your Health Insurance and Access?
Blue Daily
| 3 min read
Key Takeaways
- Health systems say consolidation allows them to improve efficiency and quality, but research shows it rarely saves patients money or improves outcomes.
- When health systems consolidate, they gain leverage — and they may use that leverage to raise prices.
- We need hospitals to adopt a better model of payment that rewards outcomes, not the volume of services provided. The value-based care model represents a solution.
Imagine if nearly every gas station in your city suddenly merged into just one or two companies. Do you think the lack of competition would make prices go up? Do you think service might suffer? Do you think the lack of choices would benefit you as a consumer?
Consolidation of hospital systems is happening in Michigan. Nearly every study conducted around the country shows that when hospitals merge together, prices go up. We are concerned about that happening here in Michigan, because that will affect the price of health insurance here in our state.
At Blue Cross Blue Shield of Michigan, 47 cents of every dollar collected in premiums went to hospitals in 2024.
Fewer systems are controlling more hospitals and providers — and it’s a proven fact that loss of competition drives up costs while doing little to improve the quality of care.
A 2024 study found that mergers and acquisitions rarely improve the quality of care or health outcomes. Hospital charges actually increased in 93% of cases, and 81% showed higher costs or no improvement in health spending or outcomes.
Less competition means higher prices for patients
Between 2020 and 2023, consolidation affected nearly 50 hospitals, more than 150,000 health care workers and millions of patients across the Lower Peninsula, according to the Detroit Free Press.
Health systems say consolidation allows them to improve efficiency and quality, but research shows it rarely saves patients money or improves outcomes.
That cost affects the price you pay
Your health insurance costs are the end of the cost equation. They reside downstream, after people use health services upstream. For example, the costs of medical care charged by hospitals and doctors. The price of prescription drugs. The cost of administration and continually evolving technology. These upstream costs flow downstream into your health insurance premium.
When health systems consolidate, they gain leverage — and they may use that leverage to raise prices. That puts pressure on insurers like Blue Cross Blue Shield of Michigan to pass on higher costs on to customers, which we work hard to avoid.
Should we pay more for the same? The answer is no. And this is why we are working hard with our hospital partners to change how health care is paid for.
We stand for affordability
Blue Cross Blue Shield of Michigan has partnered with hospitals for decades to reduce costs and improve care, and hospital price increases will hurt our members. We need hospitals to adopt a better model of payment that rewards outcomes, not the volume of services provided. Through our value-based care model, providers are paid based on patient outcomes — not volume. This model focuses on health outcomes for our members and rewards high-quality, efficient care.
We’re calling on more hospitals to move away from the outdated fee-for-service system and join us in building a more affordable, partner-based solution. Paying more for the same is not the solution.
Learn more about Blue Cross Blue Shield of Michigan's commitment to affordability here.
Photo credit: Getty Images
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