In Other Parts of the Economy, Mergers Reduce Prices. Not so Much in Health Care. | Eastern North Carolina Now

    Publisher's note: The author of this post is Katherine Restrepo, who is the Director of Healthcare policy for the John Locke Foundation.

    North Carolina could be home to one of the largest hospital behemoths in the nation if UNC Health Care and Carolinas HealthCare System finalize their partnership agreement. On a combined $14 billion operating budget, the two systems manage 50 hospitals and employ 90,000 people.

    The public has lots of questions, and they have every right to be informed since UNC's hospital system is a state-owned entity. How will this mega-marriage impact its workforce? Will UNC patients have access to services they didn't have beforehand? Will Carolinas HealthCare patients enjoy access to treatments that were previously unavailable? How will the partnership benefit rural areas?

    And, what about costs? That seems to be the big-ticket question right now.

    Typically, mergers in other sectors of the economy achieve greater efficiencies and reduce prices for consumers. In the health care industry, however, an overwhelming amount of evidence suggests otherwise. Highly consolidated hospital systems charge as much as 40 percent more for procedures compared to smaller, more fragmented health care systems. That's because potential competitors in the health care space must scale higher barriers to market entry compared to other parts of the economy. As a result, limited competition in health care is a major factor that contributes to high prices.

    What are these roadblocks? Certificate of need laws, the inability for physicians and other providers to practice medicine (and telemedicine) across state lines, and much, much, more.