Markets or Monopolies? Considerations for Addressing Health Care Consolidation in California

Over the past three decades, markets for health insurers and providers have gone through waves of consolidation. As of 2018, 95% of metropolitan areas in the United States had highly concentrated hospital markets. Markets for health insurers are also highly concentrated. Between 2006 and 2014, the combined market share of the top four insurers climbed from 74% to 83%. The coronavirus pandemic appears to be fueling another round of consolidation — especially acquisition of providers by private equity firms.

Markets or Monopolies? Considerations for Addressing Health Care Consolidation in California compiles the latest research and data on California’s health care systems and shows that consolidation is not limited to any one system, market segment, or geographic region in the state: Most markets across California are highly concentrated. Hospital markets, in particular, are now approaching “monopoly levels” in many California counties. In addition, there is mounting evidence that mergers of health care companies are resulting in increased prices for health care services, with little or no improvement in quality for consumers.

The report highlights several actions policymakers could consider, given significant consolidation. For example, California’s attorney general has the authority to block transactions that transfer a “material amount of the assets” only for nonprofit health facilities. To increase scrutiny of provider mergers in California, policymakers could require all health care providers — not just nonprofit ones — to provide written notice to, and obtain the written consent of, the attorney general.  Policymakers could also expand the authority of state regulatory agencies to include “affordability standards” when they review health insurance plans for sale in California.