To inform the development of No Surprises Act (NSA) reports to Congress, this report summarizes recent patterns of and trends in horizontal and vertical consolidation of hospitals, physician practices, and health insurers; what is known about the impacts of consolidation on health care prices, health care spending, quality of care, patient access, and health care wages; and the potential impact that NSA provisions might have on consolidation.

Environmental Scan on Consolidation Trends and Impacts in Health Care Markets

Jodi L. Liu, Zachary M. Levinson, Annetta Zhou, Xiaoxi Zhao, PhuongGiang Nguyen, Nabeel Qureshi

ResearchPublished Sep 30, 2022

Cover: Environmental Scan on Consolidation Trends and Impacts in Health Care Markets
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The No Surprises Act (NSA) was created to help protect consumers with private insurance from surprise medical bills from out-of-network health care providers. The NSA requires the Department of Health and Human Services to prepare annual reports to Congress on the effects of the NSA's provisions. This report summarizes findings of an environmental scan on consolidation trends and impacts in health care markets. It describes the evidence on price, spending, quality of care, access, and wages in health care provider and insurance markets, as well as other market trends.

The authors found strong evidence that hospital horizontal consolidation is associated with higher prices paid to providers and some evidence of the same for vertical consolidation of hospitals and physician practices. Health care spending is likely to increase in tandem with these price increases. Most studies find decreased or no change in quality of care associated with consolidation; however, findings differ by quality measures examined and setting. Horizontal consolidation of commercial insurers is associated with lower prices paid to providers as insurers gain market power in negotiations with providers, but the lower prices paid to providers do not appear to be passed onto consumers, who face higher premiums following insurer consolidation. There is insufficient evidence of the effects on patient access to care and health care wages. The few evaluations of state surprise billing laws have found heterogeneous effects on prices and have not directly examined effects on spending, quality, patient access, and wages.

Key Findings

  • The authors found strong evidence that hospital horizontal consolidation is associated with higher prices paid to providers and some evidence of the same for vertical consolidation of hospitals and physician practices. Health care spending is likely to increase in tandem with these price increases.
  • The majority of studies found no change or worse quality of care after consolidation; however, the direction of findings varied with different quality measures examined and by setting. There is an incomplete understanding of consolidation effects on quality of care across a broad set of quality dimensions.
  • There is limited direct evidence on insurer consolidation effects on health care prices due to lack of readily available data. In existing studies, horizontal consolidation of commercial insurers is associated with lower prices paid to providers as insurers gain market power in negotiations with providers. However, the lower prices paid to providers do not appear to be passed onto consumers, who face higher premiums following insurer consolidation.
  • Insufficient evidence exists on consolidation effects on patient access. There might be particular concern about access in rural settings and among vulnerable populations.
  • The few evaluations of state surprise billing laws have found heterogeneous effects on prices and have not directly examined effects on spending, quality, patient access, and wages.
  • There is a lack of evidence on the effects of private equity acquisitions.

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Liu, Jodi L., Zachary M. Levinson, Annetta Zhou, Xiaoxi Zhao, PhuongGiang Nguyen, and Nabeel Qureshi, Environmental Scan on Consolidation Trends and Impacts in Health Care Markets. Santa Monica, CA: RAND Corporation, 2022. https://www.rand.org/pubs/research_reports/RRA1820-1.html.
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This research was funded by the U.S. Department of Health and Human Services Office of the Assistant Secretary for Planning and Evaluation (ASPE) and carried out within the Payment, Cost, and Coverage Program in RAND Health Care.

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