Covering the Land of Lincoln

Medicare inpatient spending is highly concentrated, finds Commonwealth Fund

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As a result of the trend toward more consolidation in healthcare, Medicare inpatient spending was highly concentrated among just two health systems in most regions, according to a new analysis from the Commonwealth Fund.

To understand where Medicare beneficiaries across the US may be most affected by such market dynamics, the research examined the concentration of inpatient hospital Medicare spending within health systems and how this varies across the country.

Using Medicare claims data from 2021 analyzed by CareJourney, a healthcare analytics company, the analysis examined the concentration of traditional Medicare spending within regional healthcare markets known as hospital referral regions (HRRs). HRRs are geographic areas made up of zip codes and are designed to define healthcare market regions based on referral patterns of specialized hospital care, like major cardiovascular surgical procedures.

What they found: Two hospital systems accounted for more than half of traditional Medicare inpatient hospital spending in 258 HRRs and accounted for more than three-quarters of spending in 110 of the 306 total HRRs in the US


The extent to which spending was concentrated varied greatly across the country. In 2021, the HRR with the most concentrated Medicare inpatient spending was Bloomington, Illinois, in which 100% of such spending was attributable to the only two health systems in the HRR. In Bend, Oregon and St. Joseph, Michigan, both relatively rural areas, three hospitals accounted for 99% of Medicare inpatient spending.

In other parts of the country, spending was much less concentrated. Two health systems accounted for less than one-third of Medicare inpatient spending in San Bernardino, California (27%), Chicago (27%) and Los Angeles (27%), all large metropolitan areas with more than 30 hospitals in the region.

In 10 states plus Washington, DC, two hospital systems account for the majority of Medicare inpatient hospital spending in the state. In Utah, Rhode Island and Vermont, two-thirds of Medicare inpatient hospital spending is attributable to two health systems. In 16 states plus DC, a single system accounted for at least one-quarter of all Medicare inpatient hospital spending.

In 2021, HCA Healthcare, a for-profit health system, accounted for the largest share of all traditional Medicare inpatient hospital spending in the country ($21 billion, or 5% of annual national Medicare inpatient hospital spending). In eight states, HCA was also among the two largest systems with the greatest share of Medicare inpatient hospital spending.


The Commonwealth Fund cited Kaiser Family Foundation research showing that healthcare prices are higher in consolidated markets, particularly for commercial insurers. If hospital consolidation continues to increase prices in the commercial market, there could be pressure on Medicare to raise rates in line with commercial insurers to avoid access issues for beneficiaries, found Commonwealth.

In 2016, the growing gap between commercial and Medicare rates led the Medicare Payment Advisory Commission to examine whether Medicare should increase its rates to keep pace with commercial insurance. If the gap between commercial prices and Medicare prices for the same services grows too wide, there is concern some physicians might decide to stop accepting Medicare. It’s less likely, however, that hospitals will stop accepting Medicare patients.

Market consolidation could indirectly affect Medicare spending through payments to Medicare Advantage plans, the analysis found. Commonwealth only examined the concentration of traditional Medicare spending, because Medicare Advantage plans’ spending is not available. But if Medicare Advantage plans don’t have negotiating leverage with dominant hospital systems, and need to pay higher rates to those systems, then plans’ costs would rise, as would the payments made to plans by the Medicare program.

To help address concentration in hospital markets and to try to avert negative outcomes for beneficiaries, policymakers could strengthen federal merger review tools, authors said.

In addition, more research could help improve the understanding of how consolidation affects satisfaction with care, as well as outcomes, particularly for people enrolled in Medicare. In particular, research comparing hospital concentration with quality of care indicators like hospitals’ overall star ratings could provide further insights into this relationship.

Twitter: @JELagasse
Email the writer: [email protected]

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