Study: Indiana May Have a Monopoly Problem for Healthcare Services

(MUNCIE) – Hospitals and network providers for healthcare in Indiana exhibit broad signs of monopolization, causing Hoosiers to pay significantly more than the national average, says a new report from Ball State University.

Indiana has a Monopoly Problem in Healthcare; Preliminary evidence and recommendations,” a report released today by Ball State’s Center for Business and Economic Research (CBER), found that blames the state allowing healthcare organizations to enjoy not-for-profit status and the recent merger trend.

The research found that in markets where choices are restricted through mergers or hospital exits, there is consistent, high-quality evidence that prices are higher.

Michael Hicks, CBER director and the George and Frances Ball Distinguished Professor of Economics

“As a result, consumers are paying much higher prices,” said Michael Hicks, CBER director and the George and Frances Ball Distinguished Professor of Economics.  “In just 20 years, healthcare expenditures for Hoosiers have risen from $330 per person beneath the national average to more than $819 per person more than the national average.”

He noted there is increasing evidence that network mergers of hospitals across multiple markets also leads to higher prices. These studies identify price increases in the 10 percent of 17 percent range across markets in the wake of cross-market mergers. Indiana has faced significant network mergers in the past two decades.

The research also found that households in the most concentrated healthcare markets pay more than double the price per procedure than in those in markets that face the most competition.

“This lack of competition seems most acute not in rural places, but in metropolitan markets,” he said. “For example, Ft. Wayne, South Bend, Evansville, and other relatively metropolitan places face more concentrated markets than do places that are more rural. One clear implication of this fact is that market power, not provider cost is a central factor in pricing differences.”

Hicks also noted that in 2017, the most recent year for which there is data, Indiana’s not-for-profit hospitals earned more than $1.49 billion in profits.

Hicks noted his research found monopolization is a significant economic and policy problem in Indiana. To address it he recommends significant research and three broad policy proposals:

  • Restore competition to not-for-profit hospital and healthcare markets by taking a number of steps from anti-trust enforcement, ending certificate of need and local non-compete clauses, and consider broad legislation requiring breaking up hospitals and networks
  • of these markets.
  • Tax not-for-profit healthcare provides who earn accrued profits at rates consistent with private sector firms (Healthcare Assessment Fee extended to investment holdings, additional corporate, sales and property taxes).
  • Impose significant taxes and restrictions on the more than $27.7 billion in accrued profits held by Indiana’s not-for-profit hospitals.

Hicks points out that the degree of monopolization of Indiana’s healthcare providers is significant, has already weakened the state’s economy and appears to be worsening.

“These three big remedies are designed to return Indiana’s healthcare markets to a degree of workable competition,” he said. “This would reduce the price of healthcare services, increase access to healthcare services and establish a better economic environment for Indiana families and businesses. Inherent in this is the need to treat not-for-profit and for-profit firms equally under law and taxation.

“The not-for-profit market conditions in Indiana have failed to sustain competition and must be incentivized to refrain from anti-competitive practices. These recommendations are not harsh, but instead, return this market to a level of competition previously observed in the state, and which is implicit in Indiana code.”

To read the report, go to https://projects.cberdata.org/165/indiana-healthcare-monopoly

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