As the issue of affordability continues to drive our politics, we’re hearing a lot about the rising cost of healthcare with fingers pointed at “Big Pharma” and “Big Insurance.” But almost nobody has cited the main culprit, “Big Hospital.” The lion’s share of our healthcare dollars flows into hospitals and provider systems. If we want to make healthcare affordable and sustainable, we must confront the opaque and often anti-competitive practices that dominate the hospital industry.
A recent major study determined, “Hospital spending accounted for 40% of the growth in national health spending between 2022 and 2024, a far larger share than any other health spending category.”
While we’d all like to believe this is due to high-tech treatments or life-saving interventions, a lot of it is about the way hospitals bill for services, the contracts they negotiate with insurers, and the lack of transparency that shrouds their finances.
Many hospitals, especially those that claim nonprofit status, are not living up to their obligations to serve the community. The majority run up “fair share” deficits, where “nonprofit” hospitals receive tax breaks but fail to provide adequate community benefits in return.
The Lown Institute has documented that, “The total fair share deficit in 20 states amounted to $11.5 billion per year. That’s enough to wipe out the medical debt of nearly 10 million Americans, feed 15 million people facing food insecurity, or build 150,000 more affordable housing units.” This while “nonprofit” hospital executives fly around on private jets.
Now the federal government is sending fifty billion dollars to rural hospitals through the Rural Health Transformation Program, but throwing taxpayer money at something rarely helps. We need transparency and accountability in how these funds are used. Too often, rural hospitals are caught in a web of murky and opaque financing, with little oversight or public reporting.
One of the most troubling aspects of the hospital industry is consolidation, where hospitals merge and acquire physician practices, dominating the local market, driving up prices, and reducing choices for patients.
When a doctor’s practice is owned by a large hospital group, an appointment may secretly be coded as a hospital-based service in a practice called “dishonest billing.” Care classified as “delivered in a hospital” costs 300% more on average than if it’s provided in an office-based setting. For some patients, it’s been known to be more than ten times the price.
Government studies have shown that “hospital mergers increase costs and do not improve quality.” When a handful of large systems control the market, patients lose the ability to shop for value, and insurers have less power to negotiate lower rates. The result is a healthcare system that serves the interests of corporate hospital systems rather than patients and communities.
The big corporate hospitals use strong-arm, anti-competitive practices in negotiations with insurers. These include “anti-tiering,” “anti-steering” and other clauses in contracts which prevent patients from choosing more cost-effective or even higher-quality providers. Healthcare scholars say these “distorted negotiations between providers and insurers directly contribute to higher costs.”
Increasingly, these big hospital systems bring in expensive consultants to squeeze higher payments from insurers, employers, and consumers. They may use an “out-of-network negotiating strategy,” threatening to leave the insurance network—effectively cutting patients off from their doctors—to hike their prices.
And they’re not shy about it. One consultant boasted “Two of our clients recently leveraged an out-of-network strategy that ultimately resulted in contract rates double the standard annual increase,” and one “merely threatened to exit the network, leveraging social media and community news outlets to make their position public and put pressure on the payer.”
Government regulation doesn’t help either. Certificate of Need (CON) laws require providers who want to open or expand a healthcare facility to first prove to the government that the community needs the planned services. While originally intended to prevent unnecessary duplication of services, according to economists, “Instead, they’ve let existing providers block competition, reducing patients’ access to care,” and allowing existing corporate hospitals to dominate a market.
All of this means higher premiums and out-of-pocket costs for everyday Americans.
If we’re serious about healthcare affordability, we need to confront the biggest driver of healthcare spending. That is Big Hospital. Policymakers must focus on promoting competition, enforcing transparency, and demanding accountability. Only when we insist that hospitals put patients and communities first can we begin to rein in costs and build a system that works for everyone.
Ann Marie Buerkle is a former nurse and congresswoman who served as the commissioner and acting chairwoman of the Consumer Product Safety Commission under President Trump.
