A lack of competition in the U.S. healthcare system may be majorly driving up costs nationwide, despite some proponents claiming consolidation would do the opposite.
An ultrasound conducted in a doctor’s office costs $164 on average compared to $339 when provided in a hospital setting, according to Third Way estimates from March 2024. Meanwhile, just seeing a doctor costs $118 in an independent physician’s office compared to $186 in the hospital, and for many Americans, hospitals are the only option available.
The trend of healthcare providers consolidating into behemoth hospital centers has increased in recent years, and hospital administrators have defended the move by saying it’s essential for the survival of medical companies. But many lawmakers and analysts say the mergers have been driving up costs and reducing competition in the healthcare market.
“Physician consolidation with hospital systems is not inherently a bad thing. As Henry Ford proved with the Model T, consolidation and vertical integration can benefit consumers by improving quality and reducing prices,” Fred McGrath, executive director of the Center for Healthcare Affordability, told the Daily Caller News Foundation. “In theory, the same can be true in healthcare, where larger hospital systems may be better positioned to invest in advanced medical technology and specialized care.”
“The issue is when the consolidation is driven or protected by government-created market distortions,” he continued. “When large hospital systems face little competition, patients often see higher prices and fewer choices. It is cronyism and anti-competitive regulations that often tilt the playing field toward large systems and make care more expensive.”
Just one or two health systems controlled the entire market for inpatient hospital care in 47% of U.S. metropolitan areas in 2024, according to a KFF analysis published in March.
At least 47% of physicians were affiliated with hospital systems in 2024, compared with less than 30% in 2012, according to the U.S. Government Accountability Office (GAO). Recent studies show that this consolidation may cause healthcare spending and prices to increase, including one which found substantial price increases for office visits occurring in hospital settings, the GAO reported.
Still, American Hospital Association President and CEO Rick Pollack defended hospital consolidation in March, claiming some physicians prefer being acquired by hospitals so a larger organization can manage administrative responsibilities, while some rural hospitals choose to be acquired in an effort to remain in business, Healthcare Dive reported.
McGrath went on to say that “many of the largest issues surrounding [healthcare] consolidation stem from flawed policies enacted at both the state and federal level, particularly the Affordable Care Act (ACA).”
“For example, the ACA expanded the 340B drug pricing program, which has fueled cronyism by incentivizing large hospital systems to consolidate with smaller safety-net hospitals so they can access discounted drugs and use those benefits across their entire network,” he explained.
Section 340B of the Public Health Service Act requires pharmaceutical manufacturers that participate in Medicaid to provide outpatient drugs at discounted prices to healthcare organizations caring for large numbers of uninsured and low-income patients, according to an American Hospital Association fact sheet from October 2025.
Still, McGrath claimed “consolidation itself is not always the problem,” adding that the key issue is “when government policies encourage consolidation while preventing new competitors from entering the market.”
A Families USA analysis published in May found that in 42 states and the District of Columbia, just five or less health systems in each state controlled at least half of all hospital care in 2023. In nearly half of all U.S. states, just three systems controlled the majority of hospital care that year, the report says.
“This level of consolidation gives major hospitals the ability to set prices with no meaningful competition or accountability,” according to Families USA’s report.
Soaring medical costs are a massive concern for many Americans ahead of November’s midterm elections. A Pew Research Center survey released on Monday found that 73% of U.S. adults now say healthcare affordability is a huge problem for the nation, up 6 percentage points from February 2025.
“The hospitals are by far the largest [factors contributing to the nation’s healthcare affordability crisis],” Paragon Health Institute Visiting Fellow John R. Graham told the DCNF. “However, the government has imposed policies that cause problems throughout the system. One major driver [of unaffordability] is that the government forces almost all health spending through health insurers. This adds bureaucracy and administrative costs to every transaction. Health Savings Accounts, Flexible Spending Accounts, and Health Reimbursement Arrangements are options the government has given us to spend pre-tax dollars on health care.”
“Nevertheless, we have a long way to go to reduce insurers’ control over our health dollars,” Graham added.
Many healthcare providers have argued that consolidation bolsters medical facilities’ financial stability, especially for smaller providers, according to the National Conference of State Legislatures.
A Paragon Health Institute report released in April found that U.S. hospital prices have risen three times faster than inflation and twice as fast as wage growth since 2000. Hospital price inflation notably outpaces every other major sector of the nation’s economy, according to the analysis.
Lawmakers from both sides of the aisle have the increased consolidation in the U.S. healthcare system over the years. Republican Missouri Rep. Jason Smith blasted hospital consolidation and mergers in an April statement as “fueling the borderline extortionary prices hospitals charge patients.”
In February, Democratic Massachusetts Sen. Elizabeth Warren and Republican Missouri Sen. Josh Hawley unveiled a bipartisan bill aiming to combat the “rampant consolidation” in the nation’s healthcare industry that “drives up prices, squashes competition, and fuels corporate greed.”
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