In this episode, Andréa Caballero of Catalyst for Payment Reform speaks with Jaime King, JD, PhD, John and Marylyn Mayo Chair in Health Law and Professor of Health Law at the University of Auckland, and Katie Gudiksen, PhD, Executive Editor of The Source on Healthcare Price and Competition at UC Law San Francisco, about the rise of cross-market hospital mergers, the evidence linking these mergers to higher healthcare prices, the legal and regulatory challenges of addressing consolidation, and the role employers can play in supporting antitrust enforcement and healthcare affordability.
Key Insights
Cross-Market Mergers Are Driving Higher Costs Without Better Care
Cross-market mergers—where hospitals or health systems in different geographic markets combine—have become the dominant form of hospital consolidation in the United States. Although these providers do not compete for the same patients, research shows that these mergers can increase hospital prices by 7–13% or more while delivering little evidence of improved quality or efficiency, challenging long-held assumptions that consolidation benefits consumers.
Market Power Is Exercised Through Contract Negotiations
The financial impact of cross-market mergers is driven less by patient competition than by negotiations between health systems and insurers or third-party administrators. Consolidated systems can require insurers to contract with all facilities across multiple markets—or none at all—making it difficult for employers to exclude high-cost providers and contributing to price increases throughout the entire system.
Antitrust Law Has Been Slow to Catch Up with the Evidence
Federal antitrust laws provide the authority to challenge cross-market mergers, but decades of legal and economic thinking discouraged regulators from viewing these transactions as anti-competitive. As evidence of price increases has accumulated, recent merger guidelines have begun recognizing the risks posed by cross-market consolidation, though relatively few hospital mergers have been challenged in court.
States Are Leading Oversight While Federal Resources Remain Limited
With limited federal enforcement capacity, state attorneys general have become increasingly important in reviewing hospital mergers. Some states have imposed conditions such as temporary price caps and service requirements, but these remedies often expire after several years while the market power created by the merger remains, limiting their long-term effectiveness.
Momentum Is Building Across Multiple Fronts
While significant challenges remain, there is growing momentum in healthcare competition policy. Updated federal merger guidelines, increased scrutiny by state attorneys general, new state legislation addressing consolidation and contracting practices, expanding empirical research, and greater employer engagement all suggest that the landscape is shifting toward stronger oversight of healthcare consolidation and greater accountability for rising healthcare costs.
The Impact on Employers and Actions They can Take
- Restrictive Contract Terms Limit Employer Flexibility: Many employers are unaware that contracts between insurers, TPAs, and health systems may include provisions that prevent customized provider networks or the exclusion of high-cost hospitals. Increasing transparency around these contractual restrictions—and advocating for reforms that prohibit anti-competitive contracting practices—represents another opportunity for employers to improve affordability.
- Employer Purchasing Power Can Become a Disadvantage: Large employers often seek broad, consistent provider networks for employees across multiple regions. While this simplifies benefit administration, it also gives large health systems greater leverage during contract negotiations. As systems expand across markets, employers become increasingly dependent on maintaining access to those providers, reducing their ability to negotiate lower prices.
- Employers Can Influence Enforcement Without Filing Lawsuits: Employers do not need to bring antitrust lawsuits themselves to influence healthcare competition. Claims data, testimony, public comments, and documentation of rising healthcare costs can provide regulators with critical evidence when evaluating mergers or investigating anti-competitive conduct. Collaborative efforts among employers, labor unions, and business coalitions can significantly strengthen enforcement actions.