My theory why small, regional hospitals are disappearing

During the course of the past ten years many smaller hospitals have either closed their doors or merged with larger hospitals. There are various reasons for this, but I think one of the main reasons is corporate cronyism. It's always existed to a certain degree, but it has been put on steroids since during the Obama administration. This is not a criticism of Obama, it's just an observation.

Okay, so money has always played a significant role in politics. You will always have corporations that make a lot of money, everybody always wants more (I don't care who you are) and the lure of making more money is always seductive. 

Now, I don't have a problem with corporations making lots of money, and I never will.  I believe there is plenty of money to go around, enough so that every person, every corporation, in the world could be rich if they made the effort; if they sacrificed their time, and took the risks.  I mean, that's what American Exceptionalism is all about. 

So you have corporate cronyism, or socialist cronyism, or capitalist cronyism, or whatever you want to call it.  This is where large corporations, those with a lot of money like Walmart, send lobbyists or consultants to Washington to make sure laws are passed that benefit them; laws that might help them make more money. 

It is in this regard that Walmart supported a higher minimum wage.  Walmart executives know that they can afford the higher wages, while many of their smaller competitors may not be able to afford it.  In this way, Walmart is able to beat their competitors without having to beat them in the marketplace.

In other words, even if Walmart competitors have a better product, Walmart can beat them because it can afford to make deals with politicians, while their competitors cannot. (Ironically, Walmart's profits have stagnated, and they are now blaming the minimum wage hike.  Go figure!)

This is the same in healthcare.  You have large hospital groups that can afford to send lobbyists and consultants to Washington. They can afford to make deals with politicians. They give thousands of dollars to this politician, or that politician.  They even support laws that they otherwise would not support because they know they can afford it.  

For instance, Obamacare has required hospitals to hire 20 or 30 new people just to make sure they are in compliance with all the new regulations. They can afford to make all the changes that are required, while their competitors cannot.

Not helping here is that Obamacare made it easier for hospitals to merge, almost encourages it.

Because they cannot afford it, smaller hospitals have had to make decisions to either close shop or be bought our or to merge.  It is by this means that large hospitals have become larger, and smaller, regional hospitals have become a thing of the past.

I'm not saying here that I agree with Obamacare or not, this is just what is happening, or has happened. Money is important to get elected and re-elected. Money is important to get your agenda passed, and right now, like it or now, Obama is selling. 

Buying laws is important to benefiting your business.  So, so long as this is legal, it will continue to occur. And, like it or not, it has occurred under the Obama administration more so than in the past.

Further reading:

• Forbes: What '60 Minutes' Didn't Say: Hospitals Will Charge You More Under Obamacare 
• National Review:  An Arm and a Leg

Why healthcare costs have increased since 2010

So large hospital groups have succeeded in beating out the competition by supporting big government, which in turn creates laws that create regulations that smaller hospitals cannot afford. This, in turn, causes their competitors to either close their doors, or they have no choice but to merge with the larger groups. This, in turn, has resulted in higher healthcare costs.

This is contrary to the promise that healthcare costs would go down under Obamacare. Yet Obamacare has made it easier to merge, and easier to charge high prices. In fact, Obamacare almost encourages it through incentives. Check out here some quotes from Forbes.com.

This has had a great impact on the healthcare industry.  This is how larger hospitals have beat out their competition -- gobbled up the competition -- without even having a better product, or regardless of having a better product.

Here's a quote from Forbes:

The average day spent in a U.S. hospital costs five times as much as it does in other industrialized countries. That’s not because U.S. hospitals use higher technology or better care. It’s because they charge more for the same technology and the same care. Because they can get away with it.

Making matters worse, as I noted above, is that Obamacare encourages hospitals to merge, giving hospitals an even greater incentive to charge higher prices. This is due to less competition. According to Forbes:

The next thing Obamacare does is it encourages hospitals to merge, thereby giving hospitals even more market power to charge even higher prices. A study by Jamie Robinson of the University of California found that highly concentrated hospital markets–where one or two hospitals controlled most of the patient volume—hospitals charged an average of 41 percent more for common procedures than they did in more competitive markets.

Furthermore, as noted by Forbes, since Obamacare there has been a spike in hospital mergers. Forbes noted:

The spike in hospital mergers is being driven by two things. The first is that Obamacare expands government-sponsored insurance, like Medicaid. Government insurance pays less than private insurance pays, so hospitals seek to merge so they can gain more leverage on private insurers to charge whatever they want. In 1993, for example, Harvard’s two main hospitals—Massachusetts General and Brigham and Women’s—merged, and immediately began jacking up prices to the privately insured and uninsured populations.

The second is that Obamacare creates a government program, called Accountable Care Organizations, whose explicit goal is to encourage hospitals to consolidate the provider industry, thereby giving them more leverage to charge higher prices. In 2011, a Federal Trade Commissioner called attention to this problem, noting that “the net result” of ACOs “may therefore be higher costs and lower quality health care.”

Some say that the best way to bring down prices is for Obamacare to add price controls. Although all that would do is cause hospitals to stop offering services that are under priced offer procedures that are over priced.

The real resolution to this problem is to try increasing competition, something that has never been tried in healthcare. This would entail breaking up the large hospital groups with antitrust proceedings, loosening up restrictions on hospitals, repealing Obamacare, and allowing the sale of health insurance and hospital services across state lines. This would get hospitals and insurance groups to compete with one another, and the ones that offered the best quality service at the lowest price would prevail.

Further reading:

• Forbes: What '60 Minutes' Didn't Say: Hospitals Will Charge You More Under Obamacare 
• National Review:  An Arm and a Leg 
• National Review: Hospitals are to blame for obscene healthcare costs