Dr Paul Ginsburg Explains Why Consolidation in Healthcare Is Inevitable

Although hospital consolidation has not shown the benefits proponents had touted, it is inevitable that there will be consolidation in healthcare, because the environment is too challenging for smaller hospitals and many physician practices, explained Paul Ginsburg, PhD, Norman Topping Chair in Medicine and Public Policy and professor of the practice of health policy and management at the University of Southern California Sol Price School of Public Policy.

Transcript (slightly modified for readability)

I think it's inevitable that healthcare markets are going to become more consolidated. Part of it is the environment for a lot of physician practices and hospitals, particularly smaller hospitals, is not a very good environment.

The future is going to be reformed payment methods, a lot of need for health information technology, a lot of reporting on quality—this is a very challenging world for smaller organizations. So some consolidation is going to make sense for them, to be part of larger organizations, to be able to function in this new world.

On the other hand there are lots of things that can be done to address and limit the degree to which prices increase due to greater consolidation. I think the most powerful tool is narrow, or limited, provider networks that are in health plans. And we've seen this with the public exchanges in the Affordable Care Act, that many of the insurance plans offered are limited network plans and they have substantially lower premiums than plans with broad networks. And that's all because of the limited network plan's ability to negotiate lower prices.