• Hospital consolidation 100 years ago

    Today, consolidation in the hospital industry is recognized by some as a problem, a source of higher prices. One hundred years ago hospitals had the opposite consolidation problem, not enough of it. Ethnic and religious heterogeneity in 19th century America, among other factors, led to a multitude of hospitals, in part to serve patients of different ethnicities and religions, but also to benefit physicians. Jewish, Catholic, and black doctors ran their own institutions, segregated at the expense of efficient levels of capacity.

    From page 176 of Paul Starr’s The Social Transformation of American Medicine:

    That there were too many small hospitals in American was a complaint already being heard soon after 1900, and it became a steady part of criticism of the hospital system. “If many hospitals in each city could pool their interests,” wrote a hospital superintendent in 1911, “the result would be greater efficiency and greater economy–and yet nothing is more unlikely than that independent, privately controlled hospitals will pool interests.” Especially after the Depression began in 1929, private hospitals faced serious underutilization. A medical school professor in 1937, noting the large number of hospitals in debt running at 50 percent capacity, suggested that their financial troubles could be alleviated if some hospitals closed, raising the occupancy rates of the rest to 75 or 80 percent. “The trouble, of course, is that the hospitals are sectarian, or partially endowed, or are run for the individual benefit of some surgeon or staff.”

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    • Have we partially recreated this with surgicenters? The difference being that surgicenters can selectively choose patients based upon insurance and acuity of illness so that they can still make money even when not fully utilized. OTOH, we certainly have a plethora of hospital systems today. This Fiscal Times piece notes the decrease in numbers of independent hospitals. Even the rural hospitals are in networks today. Dang, health reform is hard.

    • Dr. Frakt,

      You would agree that there is a balance of consolidation and competition/independent operators, just like in other industries. Correct?

    • I’m following your lead and making my way through STAM. The following struck me as interesting, especially in light of your interest in cost shifting. From p. 172:

      “When the superintendents of several major hospitals in New York were asked in a 1904 survey whether hospitals ought to be divided into two classes–private hospitals for people who could pay and public hospitals for people who could not–they unanimously rejected the idea. If all poor patients were cared for by municipal hospitals, charitable donations would dry up, requiring higher rates in private rooms.”