Congress recently hauled CEOs from some of the nation’s largest hospital systems to Capitol Hill to answer for America’s soaring healthcare costs. And lawmakers didn’t pull their punches.
House Ways and Means Chairman Jason Smith, R-Mo., accused hospitals of building “empires” and told executives that the prices they charge patients amount to “borderline extortion.”
The hearing underscored a reality Washington has been slow to confront. Hospitals are the primary drivers of rising health costs. They are consolidating markets, exploiting federal programs and using their growing leverage to raise prices for patients and taxpayers alike.
According to federal data, hospital care accounted for roughly 31% of healthcare spending in 2024, totaling about $1.6 trillion. Hospitals also drove 40% of the growth in health spending between 2022 and 2024 ― more than any other category.
They’ve expanded their reach largely by eliminating competitors. Between 2010 and 2019, hospitals completed more than 1,500 mergers and acquisitions. Today, nearly half of the nation’s metropolitan hospital markets are controlled by one or two systems.
When competition disappears, prices rise. Hospital mergers within a market have been linked to price increases of 20% to 50%.
And despite repeated promises of greater efficiency, consolidation has produced no consistent improvements in quality. Some studies have even linked it to worse patient outcomes.
Hospitals are also aggressively buying up physician practices. According to the Government Accountability Office, about 47% of physicians are employed by or affiliated with hospital systems, up from less than 30% in 2012.
Again, the result has been higher prices. One recent study found that hospital-affiliated physicians charge 12% to 26% more than independent practices.
Federal policy is behind these trends.
For example, Medicare pays more for the same procedure when performed in a hospital outpatient department rather than a physician’s office or ambulatory surgery center.
Lawmakers highlighted stark examples at the hearing. An ultrasound that costs $164 in a physician’s office can cost $339 in a hospital outpatient setting. A biopsy that costs $150 in an independent setting can cost as much as $800 in a hospital facility.
These disparities create a powerful incentive for hospitals to acquire physician practices ― and shift care into higher-cost hospital settings.
Hospitals are also exploiting the 340B drug pricing program, which Congress created to help safety-net providers serve low-income patients by allowing them to purchase drugs at steep discounts. Today, many hospitals buy drugs at discounted 340B prices, bill insurers at full price, and pocket the difference.
The program has grown at an astonishing rate. Discount drug purchases under 340B grew from $6.6 billion in 2010 to $81.4 billion in 2024.
Lawmakers at the hearing accused hospitals of using the program to boost revenues rather than expand access to care for vulnerable patients. And there’s good reason for concern. One study found that most 340B hospitals provide lower-than-average levels of charity care.
A federal lawsuit filed in April points to another problem. Because federal law never clearly defined who counts as a 340B “patient,” hospitals may be able to claim duplicate discounts on the same prescription through different parts of a hospital system.
If Congress is serious about making healthcare more affordable, it must rethink the policies that reward consolidation and inflate hospital pricing.
Lawmakers can start by instituting site-neutral payments, so that hospitals are no longer paid dramatically more than independent providers for the same services. Reforming 340B so that its discounts actually benefit vulnerable patients — rather than hospital balance sheets ― should also be a priority.
Congress was right to put hospital executives in the hot seat last month. But hearings alone will not lower healthcare costs. Until lawmakers address the incentives that reward consolidation, regulatory arbitrage and price inflation, hospitals will continue building empires ― and patients will keep footing the bill.
Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is The World’s Medicine Chest: How America Achieved Pharmaceutical Supremacy ― and How to Keep It (Encounter 2025). Follow her on X @sallypipes.
This article originally appeared on The Detroit News: Healthcare costs keep rising. Hospitals are a big reason why | Opinion
Reporting by Sally Pipes, The Detroit News / The Detroit News
USA TODAY Network via Reuters Connect
By Sally Pipes, The Detroit News | USA TODAY Network
