Hospital Mergers Tied To Increased Layoffs, Reduced Tax Revenues: Report

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Dive Brief:

• Rising healthcare prices due to hospital mergers are associated with layoffs in non-healthcare fields, finds a new study from the National Bureau of Economic Research.
• A 1% increase in healthcare prices following a merger was associated with local employers’ headcount shrinking by about 0.4% due to higher premiums, the study found. 
• Employees in the lower and middle class who earn between $20,000 to $100,000 a year were most likely to be impacted by the cuts.

Dive Insight:

Between 2002 and 2020, there were over 1,000 mergers of U.S. hospitals, prompting researchers to investigate the impacts of consolidation on care quality and prices.

However, few teams had investigated the ancillary effects of mergers on communities in which hospitals operate, according to the research team behind the current study.

The new study compared hospital prices following mergers — collected following approximately 300 hospital mergers between 2010 and 2015 — to employment and tax data from local non-healthcare companies’ to determine the community impact of mergers.

Hospital mergers led to an increase of inpatient and outpatient prices in the two years following transactions, with approximately 40% of hospitals increasing prices by more than 5%.

When hospitals increased prices by 5% post-merger, communities tended to cut more than 200 healthcare and non-healthcare jobs, according to the study. The job cuts were likely attributable to employers being squeezed by increased healthcare premium costs, the study said.

Federal income tax revenue also dropped in communities post merger, and payments for unemployment insurance increased 2.5%.

The study also found an association between mergers and suicides and overdoses. A 1% increase in prices is linked to a 2.7% bump in deaths from suicide and drug overdose. Approximately 1 in 140 of the individuals who lost their job after healthcare prices increase died from a suicide or drug overdose, according to the study.

In a June 24 statement, the American Hospital Association, a leading lobbyist group, slammed the study for excluding healthcare employers from their analysis and attempting to link mergers to suicide rates.

“The authors’ approach to their economic arguments is, in a word, odd,” wrote Molly Smith, AHA’s group vice president for public policy. “[…] During the study period, employment increased – both overall and even more so in the health sector… Worst of all, however, is their effort to link suicide rates with hospital pricing. Quite frankly, it is unconscionable given the lengths hospitals go to every day to save people who have attempted or are at risk of taking their own life.”