Hospital Consolidation: A Growing Trend and What It Means for Healthcare Costs
National health spending reached $5.3 trillion in 2024, representing 18% of the U.S. Gross domestic product (GDP), and is projected to outpace GDP growth through 2033. This escalating cost burden is prompting increased scrutiny of consolidation within the healthcare industry, particularly among hospitals. Although consolidation can offer potential efficiencies, a substantial body of evidence suggests it often leads to higher prices.
The Rise of Hospital Systems
A recent analysis reveals a concerning trend: nearly half (47%) of metropolitan areas in 2024 were controlled by just one or two health systems for inpatient hospital care. In over 80% of these areas, a single system or a duo held more than 75% of the market share. This level of concentration meets the definition of highly concentrated markets based on current antitrust guidelines.
The trend isn’t uniform across the country. Larger metropolitan areas, with populations exceeding one million, generally have more health systems (often four or more). Although, even in these larger markets, the two dominant systems frequently control a significant portion – at least 50% – of the inpatient hospital care market. For example, in Austin, Texas, two systems control 89% of the market despite the presence of multiple providers.
Highly Concentrated Markets: A National Phenomenon
Using the Herfindahl-Hirschman Index (HHI) – a measure of market concentration – 97% of metropolitan areas were classified as highly concentrated in 2024, based on updated antitrust guidelines. So competition is limited in the vast majority of the country. Even in larger cities like Cincinnati, Los Angeles, and Miami, markets remain highly concentrated.
The Increasing Affiliation of Hospitals
The share of hospitals affiliated with larger health systems has steadily increased, rising from 56% in 2010 to 69% in 2024. This trend is observed in both rural and urban areas, though rural hospitals have a lower affiliation rate overall. Over half of system-affiliated hospitals are now part of systems with at least 15 hospitals.
A Continuing Trend: Concentration is Increasing
The trend toward greater concentration isn’t slowing down. 80% of metropolitan areas experienced increased hospital market concentration between 2015 and 2024, or were already controlled by a single health system throughout that period. This suggests a continued shift towards less competitive hospital markets nationwide.
What Does This Signify for the Future?
The increasing concentration of hospital markets raises concerns about affordability and access to care. While consolidation may offer some benefits, such as improved efficiency and the ability to sustain services in underserved areas, the evidence suggests it often leads to higher prices. Policymakers are paying close attention to these trends as they consider strategies to make healthcare more affordable.
This work was supported in part by Arnold Ventures. KFF maintains full editorial control over all of its policy analysis, polling, and journalism activities.
Frequently Asked Questions
- What is market concentration? Market concentration refers to the extent to which a few firms control a particular market. In healthcare, it measures the share of hospital services provided by a small number of health systems.
- What is the HHI? The Herfindahl-Hirschman Index (HHI) is a commonly used measure of market concentration. Higher HHI values indicate greater concentration.
- Why is hospital consolidation a concern? Consolidation can reduce competition, potentially leading to higher prices for patients and employers.
Explore further: Learn more about national health expenditure data from the Centers for Medicare &. Medicaid Services.