The US economy is probably the most competitive in the world, at least compared to other large economies. But the US economy may be less competitive internally. As economist Thomas Philippon writes in The Great Reversal: How America Gave Up on Free Markets: “First, US markets have become less competitive: concentration is high in many industries, leaders are entrenched, and their profit rates are excessive. Second, this lack of competition has hurt US consumers and workers: it has led to higher prices, lower investment and lower productivity growth. Third, and contrary to common wisdom, the main explanation is political, not technological: I have traced the decrease in competition to increasing barriers to entry and weak antitrust enforcement, sustained by heavy lobbying and campaign contributions.”

Now the way this issue is typically discussed among politicians these days is in the context of Big Tech’s market dominance. Yet America’s tech titans don’t much act like monopolies with secure competitive positions. They spend a lot on R&D, for instance. And they’re constantly bumping up against each other. These are big and powerful companies, no doubt, but they got that way by supplying goods and services that consumers greatly value.

It would make more economic sense (though perhaps not political) for politicians to instead highlight an industry where a lack of competitive intensity seems to be causing measurable problems — the increasingly consolidated hospital sector. Back in 2015, I wrote about the paper “The Price Ain’t Right? Hospital Prices and Health Spending on the Privately Insured,” which found that prices for commercial insured patients at monopoly hospitals “are 12 percent higher than those in markets with four or more rivals.” 

But high prices aren’t the only problem. In “Changes in Quality of Care after Hospital Mergers and Acquisitions,” a new analysis published in The New England Journal of Medicine, researchers compared 246 acquired hospitals to a control ground of nearly 2000 hospitals. Their findings: “Hospital acquisition by another hospital or hospital system was associated with modestly worse patient experiences and no significant changes in readmission or mortality rates. Effects on process measures of quality were inconclusive.”

So a consolidating sector with higher prices and outcomes that are, depending on the metric, worse, the same, or inconclusive? Seems like a possible competition problem. Not surprisingly, then, Philippon mentions hospitals in his book, noting there have been almost 70 mergers per year since 2010 and nearly 80 percent of Americans living in metro areas “are in highly concentrated hospital areas.”

Some of Philippon’s analysis: “Managers always justify mergers by claiming they will increase efficiency, lower costs, and improve care. They carefully avoid the issue of market power. And if history is any guide, the efficiency gains are unlikely to happen, but price increases are very likely.”  Also likely, it seems, is patient care that’s no better or even worse in some ways.

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