A worrisome trend in healthcare system ownership is leaving patients with fewer options and higher costs.
In recent years, hospital markets across the country have become increasingly consolidated. More than 80% of U.S. doctors are employed by hospitals or corporate entities instead of independent practices, up from 52% in 2018.
Research and peer‑reviewed academic studies consistently show that hospital consolidation is associated with higher prices and increased overall healthcare spending, without consistent improvements in quality or outcomes. This includes a report prepared by the Department of Health and Human Services in consultation with the U.S. Department of Justice and the U.S. Federal Trade Commission, and independent research from Yale and Carnegie Mellon.
The type of organizations snapping up hospitals, specialty services, and physician practices is further cause for concern.
- According to the American Medical Association, 24% of community hospitals are owned by for-profit companies.
- Nearly one in ten hospitals are owned by private equity firms.
- More than 5,700 physician practices were owned by private equity in 2021, up from 816 in 2012.
Patients are already facing higher costs for care in hospital-owned clinics and surgical sites. But now, organizations that exist simply to turn a profit are infiltrating the healthcare system and impacting physician offices, hospitals, specialty medical practices and more.
What this means for Alaska
Alaska has had the highest or near-highest healthcare costs in the nation for 15 consecutive years, according to Alaska Department of Labor and Workforce Development data. Urban Alaskans spend roughly 12% of household income on medical care, compared with 8% nationally. Providers in Alaska charge commercial insurers more than twice what Medicare pays for the same professional services, the highest ratio of any state in the country.
Outpatient prices at for-profit hospitals are consistently higher than at nonprofit hospitals. A study found private equity-owned hospitals earned 27% more income than hospitals not owned by private equity, fueled by increasing charges across every department.
These numbers matter. They eventually show up in the places that affect everyday life: family budgets, business expenses, employee paychecks, and monthly premiums.
How Premera is responding
Having served Alaskans since before statehood, Premera understands the challenges associated with healthcare in Alaska. Delivering care across vast distances carries real costs, and geography alone creates barriers that most states never have to contend with. At the same time, the industry needs to work together to address the factors that make Alaska an outlier year after year.
That’s why Premera is:
- Pushing back on healthcare prices that reflect leverage from profit-driven conglomerates, rather than actual cost or quality improvements, through contract negotiations.
- Improving cost and quality visibility in our provider directory so members can better compare expected procedure costs and provider performance before receiving care.
- Advocating for transparency and payment reform that reduces unwarranted price variation across the healthcare system.
