The report, released Sept. 17, examined 112 metro areas in 43 states and showed that 81 metros, or 72%, in 2016 were considered highly concentrated according to the standards used by the U.S. Department of Justice. That's up from 67% in 2012. More than two-thirds of metros saw concentration grow between 2012 and 2016, according to the report.
Kevin Kennedy, an author of the report and a researcher at the institute, said in an interview that a large amount of evidence already shows growing concentration and consolidation in the hospital industry. What surprised the authors was the prevalence of concentrated markets, Kennedy said.
"We did find it was pretty striking ... that 72% of hospital markets were highly or very highly concentrated. And then also, that about 69% of markets increased in market concentration over time," Kennedy said. "Just how high those numbers were [was] striking."
To gauge concentration levels, the authors of the report used the Herfindahl-Hirschman Index, or HHI, a commonly accepted measure of market concentration used by the Justice Department. They measured HHI on a scale of 0 to 1, with higher numbers indicating greater concentration.

HCCI is a nonprofit that receives funding and data from four health insurance companies, including UnitedHealth Group Inc. and Humana Inc. The report examined 1.8 billion healthcare claims from people with commercial insurance between 2012 and 2016.
Consolidation in the hospital industry
A primary driver of concentration is consolidation among hospital systems, the report's authors noted.
Such mergers have been happening at a rapid pace in recent years, with 722 M&A deals involving 1,712 hospitals taking place between 2010 and 2017, according to the American Hospital Association's Trendwatch Chartbook 2018.
Some economists claim consolidation increases prices and reduces the quality of care due to a lack of competition.
Leemore Dafny, a professor of business administration at the Harvard Business School, told Congress in February 2018 that the M&A trend would continue for hospitals and other sectors of the healthcare industry, which may not be good for patients.
"There is substantial academic literature that finds horizontal mergers of competing health care providers tends to raise prices, and very limited evidence to suggest there are offsetting benefits to patients in the form of improved quality," Dafny said.
Speaking at the same congressional hearing as Dafny, Martin Gaynor, a professor of economics and health policy at Carnegie Mellon University, said in his written testimony that "big does not equal bad," but added that "consolidation can reduce competition and enhance market power and thereby lead to increased prices or reduced quality."
However, a Sept. 4 report commissioned by the national hospital representative AHA found that mergers decreased costs, improved quality of care and increased hospitals' revenue per admission.
"Mergers have become one of the critical means through which hospitals can provide their communities with high-quality, convenient and cost-effective care," Rick Pollack, AHA president and CEO, said in a Sept. 4 statement. "The benefits of mergers allow hospitals to create connected networks of care and keep the focus where it belongs: on improving care for the patient."
The U.S. Federal Trade Commission has recently been successful when cracking down on mergers between healthcare providers.
During a Sept. 17 U.S. Senate Judiciary Committee hearing, FTC Chairman Joseph Simons said the FTC has had five straight successful lawsuits against healthcare consolidations, including three hospital mergers. Simons also said the agency plans to look at hospital mergers retroactively and examine their effects on labor.
Bill Johnson, a senior researcher with HCCI and an author of the report, stressed that the Sept. 17 report was not an attempt to connect concentration directly to price increases and explore a cause and effect relationship. One reason the report did not go into the impact of hospital concentration is because of the large amount of research that has already addressed the issue, Johnson said.

While Johnson and Kennedy avoided
All five of the markets that saw the largest price increases between 2012 and 2014 were considered highly concentrated in 2012, and four of the five had increases in their HHI over the same period.
Levels of market concentration varied across the country and were not necessarily correlated to the size of a metro area. New York City, Chicago and Philadelphia were three of the five least concentrated markets, according to the report. New York City's HHI of 0.076 was the lowest.
The three highest concentrated markets were in metro areas with populations of less than 300,000 in 2016. Springfield, Mo., had the most concentrated market with an HHI of approximately 0.780. Springfield was followed by Peoria, Ill., and Cape Coral, Fla., with HHIs of 0.776 and 0.693, respectively.
While the majority of markets became more concentrated, some markets decreased in concentration. For example, six of the eight most concentrated markets in 2012 became less concentrated by 2016.
Changes over time tended to be specific to the metro area. Both low and highly concentrated markets saw their HHI grow significantly between 2012 and 2016, while both low and highly concentrated markets saw little change in their HHI, the report found.
