A closer look at provider market consolidation and the role of private capital

This paper examines the relationship between provider market consolidation, setting-of-care (SOC) dynamics, and healthcare costs in the United States. The authors argue that consolidation is not solely a driver of rising unit prices, but also a response to structural pressures, including rising practice costs, stagnant physician reimbursement, and increasing administrative complexity. Drawing on recent empirical analyses, the authors demonstrate that prices vary substantially by SOC, with hospital outpatient departments representing the highest-cost settings. They further show that physician affiliation models are associated with distinct patterns of SOC utilisation. These findings suggest that the relationship between consolidation and cost is not uniform and depends on underlying organisational incentives. The authors contend that current policy discourse around private capital lacks sufficient nuance and risks obscuring more fundamental drivers of cost growth, particularly reimbursement design. They call for a more balanced dialogue and additional research to better understand how consolidation, payment policy, and SOC decision-making interact, concluding that policymakers should prioritise incentives that support clinically appropriate care in lower-cost settings.