The issue of hospital consolidation and rising prices might be tackled by increasing targeted financial support for “withering” essential hospitals rather than solely focusing on antitrust regulation, according to a recent study of hospitals’ capital expenditures.

The analysis, published in this month’s issue of Health Affairs, outlines an association between hospitals’ investments in capacity, services or other improvements and their market power. That effect drives more patient volumes and bargaining power to higher spenders while reducing both among hospitals unable to make the investments.

The result, researchers wrote, is “a cycle of expanding and withering hospitals” that increases total healthcare spending and sets some hospitals on a course for closure or acquisition.

“Even with no mergers and acquisitions, markets may consolidate as hospitals wither and demand shifts to high-price hospitals,” the Harvard University researchers wrote in the journal. “Although these shifts might lead to better-quality care, they also could diminish competition and impair access over time.”

The researchers conducted their analysis by reviewing 2010-19 data on hospitals’ capital expenditures, service volumes and other characteristics from the Healthcare Cost Report Information System (as packaged for analysis by the RAND Corporation). Price estimates came from commercial claims data reported by the Health Care Cost Institute from 2012-19.

The study’s sample included 2,501 hospitals spanning most of the country’s hospital referral regions and about half of metropolitan statistical areas.

It showed that hospitals with the most capital spending from baseline had greater upward changes in patient volumes—for instance, the 10% of hospitals with the highest capital expenditure had a 28% greater change in volumes than those in the middle of the pack. Conversely, the 10% of lowest-spending hospitals’ volume change was 22% lower than the middle hospitals.

Further, when controlling for factors such as hospital size and patient mix, average index hospital prices for the top 10% of spenders rose by 46.3% from 2012-19, but, for the bottom 10%, the average price increase was 31.9%.

Framed another way, “the difference in estimated prices between hospitals in the lowest and highest deciles of capital expenditure nearly doubled between 2012 and 2019,” the researchers explained. “In 2012, prices for hospitals with the highest capital expenditures were 15% higher than prices for hospitals with the lowest capital expenditures. … In 2019, this price gap increased to 27%.”

The findings stand out in a hospital price policy debate that largely centers on merger and acquisition activity, the researchers noted. The “separate and complementary” trend of capital expenditures “suggests important limits to antitrust as a mechanism to address high and rising prices,” as a block on dealmaking alone wouldn’t prevent the feedback loop outlined in the study.

Beyond the concerns of reduced access to care, the researchers stressed that policymakers must keep an eye on struggling hospitals’ service line closures on declining quality as an indicator of potential failure.

And, though it is still unclear as to whether higher reimbursement or greater access to capital for struggling hospitals would be a net positive, the researchers’ findings on the impact of capital expenditures “could inform strategies of targeted support to forestall or eliminate the financial decline of withering hospitals, thereby preserving access and promoting competition,” they wrote.