Goal of NYU-Continuum Hospital Mega-Merger: Raising Prices

On Wednesday, two big New York City hospital chains—New York University’s Langone Medical Center and Continuum Health Partners—announced that they were looking into merging into one mega-entity. The hospitals put out a joint statement filled with the usual claptrap about “enhancing the quality of care” and creating a “fully integrated health care delivery system.” But make no mistake. There is only one reason why these two hospital chains are linking arms: to force insurers and patients to accept higher prices for their services.

Technically speaking, the two entities have signed a “memorandum of understanding” which commits them to spending six months to “assess the potential merits of such a partnership.” The New York State Department of Health, along with the Federal Trade Commission, would have to sign off on the merger. “This is by no means a done deal,” says NYU spokeswoman Lisa Grenier.

As I discussed in March, the most recent set of studies by economists indicates that hospital mergers have no effect on the quality of care, but do have a significant effect on the price that hospitals charge. Berkeley economist James Robinson examined 27 hospital markets across eight states, and found that hospitals in more concentrated markets charged 44 percent more, on average, for common medical procedures like coronary angioplasty and knee replacement. Nearly all of that extra revenue went straight to the hospitals’ “contribution margins,” or bottom lines...