Dallas may be a bargain on many fronts, but it has some of the most expensive health care in the nation.

And Baylor University Medical Center, located in the heart of Dallas, generates more pretax income than any hospital in North Texas -- almost $357 million in 2015.

That hospital's pretax profit margin was nearly 27 percent, far above the 14 percent average margin for all Dallas-Fort Worth hospitals, according to the Texas Health Market Review 2016, an annual report on the industry's financials.

High prices and high profits aren't much of a clarion call when a not-for-profit health system is proposing a major merger. Last week, Baylor Scott & White Health in Dallas and Memorial Hermann Health System in Houston agreed to combine operations with the aim of closing the deal next summer.

Each is a leading player in its respective market and they share a similar faith-based mission. In combining, their primary goal is to reduce health costs -- or at least slow the growth in health spending, said Baylor Scott & White CEO Jim Hinton, who would lead the new organization.

But industry consolidation hasn't led to lower prices, and some studies show that prices climb after hospital mergers. One reason is that big providers can negotiate better deals with insurers and employers because many people insist that top hospitals be included in their insurance network.

"Baylor in D-FW and Scott & White in central Texas have established themselves as must-have providers," said Allan Baumgarten, a health care analyst who publishes the annual market review for Texas and seven other states.

How that plays out for consumers is not clear because health plans and employers negotiate discounts on their prices. For what it’s worth, posted hospital prices show that Baylor University Medical Center is more than competitive.

It charges less than the average rate for the most common hospital treatments, from a normal newborn birth to a bowel procedure. Even a heart transplant is over $200,000 less than the average price for all hospitals in the state, according to a pricing website operated by the Texas Hospital Association.

How can hospitals offer competitive rates and generate high profit margins?

The growth of the Dallas area is one factor because it ensures high demand, Baumgarten said. Then throw in efficiencies from a large operation and negotiating clout from being one of the preferred hospitals in the region.

“You have to maximize revenues in contract negotiations and hold down expenses, and I’m guessing that Baylor has been very successful at both,” Baumgarten said.

Baylor merged with Scott & White five years ago and has saved almost $740 million by reducing redundancies, the company said. Last year, a new initiative saved an additional $290 million.

Over the same time -- and over a longer period -- Baylor Scott & White has been racking up significant gains in revenue and income. Annual pretax income, which includes investment gains, has climbed from about $100 million in 2002, to nearly $750 million in 2015 for all its D-FW hospitals combined, according to the Texas report.

That’s even faster than national increases in health spending.

“It’s the Wild West,” Baumgarten said, only half-joking.

Employers in the region have long complained about high health care prices. Sometimes, insurers and providers have clashed publicly over their next coverage contract.

A report by the Health Care Cost Institute found that Dallas was the leading region in health spending in 2015. Its total spending was $6,126 per capita, well above the national average of $4,653, the report found.

The Peterson Center on Healthcare and Kaiser Family Foundation have created a tracking tool that shows a wide range in hospital charges. To get prices actually paid by large employer plans, it uses a database of 15 million enrollees.

"Posted charges are almost meaningless," said Gary Claxton, director of the health-care marketplace project at Kaiser.

For a full-knee replacement in 2016, North Texas hospitals were among the most expensive. In Dallas-Plano-Irving, the average price was over $43,000, and in Fort Worth-Arlington, it was nearly $50,000. The national average was $34,000, according to the Kaiser tracker.

Mergers can create savings in many areas for a hospital system, from buying supplies in bulk, to negotiating fees with doctors, to spreading technology costs over more patients, Claxton said. But over time, it’s unlikely that a hospital system would be so efficient that it could have both high margins and low prices, he said.

Even the savings aren’t guaranteed to help consumers.

“No one forces the hospitals to pass the savings on,” Claxton said.

But Baylor-Memorial would have many levers to pull. Both companies have their own insurance plans, and Baylor is already offering a direct-to-employer insurance option with lower prices and a narrower network.

Baylor’s system-wide margins are roughly twice as high as Memorial Hermann’s. And in 2015, Baylor’s flagship hospital in Dallas earned over $200 million more than Memorial’s flagship in Houston, even with lower patient revenue. That suggests a big potential upside in the combination.

What could pay off most, said CEO Hinton, are the potential savings from transferring each system’s best practices. They include surgery, trauma and other areas of integrated care.

“The continued increase in prices is not sustainable,” Hinton said last week. “Something’s gotta give.”