I feel like the blame too often goes to insurance companies, but insurance companies are a natural player in a free market system. When you are sick, last thing you will do is shop around 10 different doctors and compare prices, instead insurance companies do this for you. They negotiate a price with the provider, and if the insurance company isn't happy the provider risks not being in-network and loosing a large pool of patients. In an ideal world, this system should work.
We have created a regulatory environment with high fixed overheads, so:
a) consolidation lowers the fixed costs, encouraging entities to centralize these fixed costs to minimize them
b) makes it difficult for new independent players to enter the market
Rather than a metro area having 8 independent hospitals all competing against each other (giving insurance companies a lot of leverage in negotating prices with providers), that metro area might have 2 companies with 4 hospitals each, so you have 2 companies that know what the other's hospital charges for services, and in their own interest of profit aren't interested in getting into a price war with the other.
What I'm worried about is hospital consolidation. https://image.slidesharecdn.com/annenberg-frakt-150324142714...
We have created a regulatory environment with high fixed overheads, so: a) consolidation lowers the fixed costs, encouraging entities to centralize these fixed costs to minimize them b) makes it difficult for new independent players to enter the market
Rather than a metro area having 8 independent hospitals all competing against each other (giving insurance companies a lot of leverage in negotating prices with providers), that metro area might have 2 companies with 4 hospitals each, so you have 2 companies that know what the other's hospital charges for services, and in their own interest of profit aren't interested in getting into a price war with the other.