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Economist says hospital buyout could increase competition, limit efficiency

By Will Wadley, KECI Weekend Anchor, wwadley@keci.com
Published On: Mar 28 2014 05:53:27 PM MDT
Updated On: Mar 28 2014 07:02:06 PM MDT
MISSOULA, Mont. -

Bryce Ward, just like any economist, will tell you competition is key. Ward specializes in health care for the University of Montana’s Bureau of Business and Economic Research, and he says a merger with Providence Medical Group, which runs St. Patrick Hospital, would have killed competition.

He says a buyout of Community Medical Center from out of town will make competition stronger.

The hospital had been in partnership talks with several larger medical groups since last year. Steve Carlson, CEO of Community Medical Center, confirmed Friday afternoon that Community Medical Center is being bought out by Billings Clinic and the Tennessee-based RegionalCare Hospital Partners group.

"We could have pro-competitive effects from this,” said Ward. “It could be that this actually strengthens Community relative to what it was as a player against Providence. We may actually benefit from that with more investment and more competition."

Ward says the downside from the deal is that both Missoula hospitals will miss out on efficiency gains.

"The Billings Clinic isn't here, so you also don't expect to see the same kinds of potential efficiencies in terms of sharing equipment or increasing the utilization of certain specialists,” said Ward. "The real questions are, to what extent will a back office become more efficient? You're basically having this larger health care system, so in theory, you may be able to streamline some of your accounting, and dealing with insurance companies, etc.”

Ward says there is a chance the buyout will change the relative bargaining power between insurance providers, which would lower costs.

"There may be some, just because Billings becomes a bigger behemoth in the state, but it's hard to say without getting into real details."