02/23/2012 12:15 pm ET Updated Feb 23, 2012

Health Care Costs Seen As Concern By Regulators With Rise In Hospital Mergers

An uptick in hospital mergers is grabbing the attention of federal regulators, who are sounding alarms about potential increases in health care costs.

Though some mergers can create leaner, more efficient systems that lower costs, others can dampen competition, reduce choice and send prices upward. That's the Federal Trade Commission's concern in Albany, Ga., where the only two hospitals in town decided to merge in 2010. The regulators are considering a Supreme Court challenge to the merger, said the Federal Trade Commission's chairman, Jon Leibowitz, during a visit to The Huffington Post newsroom in New York.

"If this hospital merger is allowed to go through, it's going to give a blueprint for how to design the most anti-competitive outcome that will raise health care costs for every consumer in rural areas and small cities, and that will be a huge problem for all of us," Leibowitz said.

The FTC already lost a round in court last year against Phoebe Putney Health System, a nonprofit network of facilities run by the Albany-Dougherty County Hospital Authority, which is acquiring Palmyra Medical Center from HCA, the largest for-profit hospital chain in the United States. The $198 million deal closed in December and the facilities are in the process of combining their operations.

Hospital mergers are on the rise as chains seek to increase market share, exert leverage against insurance companies and reduce expenses. President Barack Obama's health reform law is driving some of this activity. The law cut $155 billion from Medicare's payments for hospital services and encourages medical providers to streamline operations and collaborate more. "You can have some consolidation that can be pro-competitive," Leibowitz said.

Regulators have been examining hospitals beyond Albany. The Federal Trade Commission also waged a battle against a merger in the Toledo, Ohio, area and is weighing the effects on competition in the health care marketplace of a slew of deals across the country between hospitals, physician practices and other entities, The New York Times reported last year.

Hospitals that operate in regions with less competition are able to charge higher prices and enjoy bigger profit margins, University of California, Berkeley health economist James Robinson concluded in a study published in the American Journal of Managed Care last year. Robinson and his fellow researchers compared prices for six surgical procedures including joint replacements and found hospitals that dominate local markets charge more than comparable facilities in more competitive areas.

When a Catholic hospital system expands to acquire a facility that hasn't previously had this type of affiliation, women may encounter obstacles to obtaining reproductive health services, including contraception, sterilization and abortion, that run afoul of Roman Catholic Church teachings, The New York Times noted in a recent story. Democratic Gov. Steve Beshear of Kentucky halted one such deal last year.

Bianca Bosker contributed to this report.