💡 What’s Happening?
Not every conversation that occurs in Austin is important: there’s plenty of unserious talk around college campuses or food truck parks. But what’s said during a Capitol hearing has significant influence on legislation – especially statements made in relation to healthcare.
Healthcare policy pundits often try and bring national conversations to Texas, thinking that the policy landscape is the same here as it is in California, New York or Oklahoma. As the legislature approaches healthcare affordability, it’s important for everyone to have the full picture, and make sure the information is geared to the realities in Texas.
The following claims have been paraphrased. But feel free to quote us on the responses.
👥 A Conversation About Consolidation
🗣️ “Hospital and physician group consolidation is the primary driver of healthcare cost growth in Texas – Texas leads the nation in hospital-market consolidation.”
💬 “Consolidation is often the symptom of low economic viability for independent practices, not the cause. And actually, Texas is the third least consolidated state in the nation – there’s so many kinds of hospitals to go around, competition is alive and well.”
When independent physicians face inadequate, complex reimbursement and growing administrative burdens, affiliating with a hospital system can help preserve access to care in their communities. The merger didn’t create the underlying financial pressures; it is usually a response to them.
With nearly 600 individual hospitals, 71 hospital systems, more than 450 non-hospital affiliated Ambulatory Surgical Centers and over 13,000 independent physician practices, Texas has a robust and competitive healthcare landscape. In fact, looking at Families USA ranking on hospital consolidation, Texas is ranked 3rd from the bottom in consolidation – that’s a sign of a competitive market.
Meanwhile, an American Medical Association study found Blue Cross Blue Shield of Texas holds a majority market share in every Texas metro area studied, ranging from 37% in Austin-Round Rock to 74% in Abilene.
🐖 Medicare Isn’t a Piggy Bank
🗣️ “Medicare reimbursements and Medicaid supplemental payments match or exceed hospitals’ cost of care. Any contradictory claims are ignoring the ‘contribution margin’ that works in their favor. Cost-shifting from government payers to commercial insurance is a myth.”
💬 “You’re forgetting about a hospital’s fixed costs to stay legally compliant. Also, ‘Positive contribution margins’ doesn’t mean it covers a hospital’s full cost of operating, and supplemental doesn’t mean completing payments.”
A positive contribution margin doesn’t mean a hospital is breaking even. Contribution margin analysis excludes fixed costs – including the capital, staffing, regulatory and compliance costs required to keep a hospital operating 24/7.
Those costs don’t disappear when patient volume falls or reimbursement comes up short. In fact, 43% of Texas’ rural hospitals reported negative margins in 2025 despite payer mixes heavily weighted toward Medicare and Medicaid.
Hospitals also subsidize physician practices to preserve access, particularly amid specialist shortages and growing reliance on locum tenens coverage in rural communities. Those subsidies are another cost hospitals absorb to keep services available.
🏥 Hospitals = Businesses
🗣 ️”Because hospitals have historically been insulated from market pressure by favorable government reimbursement, they have never had to pursue efficiency the way a normal competitive industry would.”
💬 “Hospitals are efficiency pioneers – without effective application of efficiency, hospitals couldn’t run a successful business.”
Texas hospitals have implemented labor-productivity and flexible-staffing programs, supply-chain and vendor management, corporate overhead controls, drug utilization management and patient-throughput initiatives, all to improve efficiency.
These aren’t one-off cost-cutting exercises. They’re increasingly permanent parts of hospital operations.
Texas hospitals have also been early adopters of value-based payment arrangements, with quality and efficiency requirements built into Medicaid supplemental and directed-payment programs. The state’s All-Payer Claims Database shows inpatient costs have decreased over time alongside these efforts.
Hospitals are businesses – and inefficiency is bad business.
“A pilot program conducted across seven emergency care facilities in Texas found that healthcare providers could significantly reduce both operating costs and carbon emissions through relatively simple operational changes. …The initiative, which involved emergency care centers in cities including Wichita Falls, Odessa, Cypress and Pearland, generated more than $30,000 in annual savings per facility while reducing greenhouse gas emissions by more than 900 metric tons of carbon dioxide equivalent (CO₂e) across the participating sites.”
American Bazaar: Texas healthcare pilot finds path to $187 million annual savings
⭐ Before policymakers reach for the scalpel, they’ll need to understand the full spectrum of what’s driving healthcare costs – and what’s keeping care available.
📖 Learn More
THA’s Affordability Hearing Clarification
THA’s Letter to the Chair of the House Select Committee on Healthcare Affordability
Prices & Patient Peace of Mind
