Hospitals Claim Mergers Cut Costs To Get Deals Approved, But The Savings Aren’t Adding Up

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Evie Fordham Politics and Health Care Reporter
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Although hospitals claim they will be able to cut costs should their merger or takeover deals be approved, research suggests the savings are not adding up to support those assertions.

More than 2,500 hospitals were “involved in mergers or takeovers between 2000 and 2015,” but in most cases, the deals did not result in significant savings, according to the UCLA Anderson School of Management. Many of the hospitals applying for permission to merge say they will save big on medical supplies and equipment, but acquired hospitals saved just 1.5 percent annually on supplies from 2009 to 2015, according to a National Bureau of Economic Research paper cited by Axios on Tuesday.

The paper reported “mixed evidence on savings” for acquiring hospitals.

The Federal Trade Commission, which approves such deals, is inclined to view claims of cost-cutting “favorably when adequately substantiated,” according to the UCLA Anderson School of Management. But now that reasoning might not be as compelling, according to Axios.

“Regulatory barriers, including the anti-kickback law, limit the ability of hospitals to work with physicians to bring down purchasing costs further,” the American Hospital Association said in response to the research, according to Axios. (RELATED: Trump Administration Requires Hospitals To Post Standard Prices Online)

Hospitals cutting costs should “translate into lower prices for insurers and patients,” yet hospital costs are the highest they have ever been in the U.S., according to the UCLA Anderson School of Management.

Follow Evie on Twitter @eviefordham.

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