Category Archives: Monopoly

‘Hospital purgatory’: Confidence in healthcare plunges as criticism grows louder and larger

Posted on by • Posted in Board, Financial Stewardship, Financial Strength, Financial Viability, Financially Distressed, Health System, Hospital, Hospital Industry, Leadership, Market Consolidation, Market Outlook, Market Power, Monopoly, Monopoly Behavior, Price Transparency, Public Opinion, Public Perception • Leave a comment
https://www.beckershospitalreview.com/?view=article&id=218056%3Ahospital-purgatory-confidence-in-healthcare-plunges-as-criticism-grows-louder-and-larger&catid=31&utm_medium=email&utm_content=newsletter

Payers, pharmacy benefit managers and drug manufacturers are no strangers to heavy criticism from the public and providers alike. Now another sector of the healthcare system has found itself increasingly caught in the crosshairs of constituents looking to point a finger for the rising cost of care: hospitals.

As sharp words against the industry bubble up more often and encompass a wider variety of issues, it marks an important turn in the ethos of American healthcare. Most policymakers have historically wanted hospitals on their side, and health systems are often the largest employer within their communities and in many states.

“In my career, I’ve never seen things more aligned to the detriment of hospitals than it is now,” Paul Keckley, PhD, said. Dr. Keckley is a widely known industry analyst and editor of The Keckley Report, a weekly newsletter discussing healthcare policy and current trends. 

Confidence in the medical system as a whole fell from 51 percent in 2020 to a record low of 38 percent in 2022. Though the healthcare system is among all major U.S. institutions facing record-low public confidence, are hospitals ready for an era of widespread distrust? 

“We’re going into hospital purgatory. It’s a period in which old rules may not work in the future,” Dr. Keckley said. “The only thing we know for sure is that it’s not going to get easier.”

State-versus-hospital fights have popped up throughout the U.S. over the past year. Most recently, in Colorado, a back and forth unfolded between Gov. Jared Polis and the state’s hospital association over who is ultimately responsible for high care costs. In a speech Jan. 17, the Democratic governor accused Colorado’s hospitals of overcharging patients and sitting on significant cash reserves.

“It’s time that we hold them accountable,” he said.

The Colorado Hospital Association says the data supporting those claims does not reflect the several ongoing industry challenges, among them labor shortages, regulatory burdens and inflationary pressures.

“Unfortunately, we continue to hear rhetoric against the hospitals and health systems that have worked diligently on healthcare quality, access and affordability,” CHA said in a statement to Becker’s. “Colorado’s hospitals and health systems have been working with the administration on many of these programs, including reinsurance, hospital discounted care, price transparency, out-of-network patient protections, and more.”

Some 1,500 miles eastward, another incident of hospital-community conflict grew. In January, Pennsylvania lawmakers promoted a nonpartisan report that accuses UPMC of building a monopoly in the state through consolidation over the last decade — the Pittsburgh-based system refuted the claims, saying they were based on “flawed data.”

To the south, North Carolina officials accused the state’s seven largest health systems in June of using pandemic aid to enrich themselves. Hospitals said the accusations were based on “cherry-picked data” spun in a way that does not reflect their ongoing challenges.

As state- and market-level fights against hospitals intensify and grab national attention, hospitals and health systems may find themselves less familiar in steadying public perception than their payer and pharmaceutical counterparts, who are no strangers to vocal opponents.  

“With public opinion shifting a bit amid COVID, and with some anecdotal evidence that hospitals are doing some bad things, state policymakers feel that they are enjoying the political will to make these gestures,” Ge Bai, PhD, said. “It’s also a key issue for voters. Even if they don’t do anything in reality, the gesture will probably get political capital.”

Dr. Bai is a professor of accounting and health policy at Baltimore-based Johns Hopkins University. She believes a key underlying factor driving hospital critiques as of late is the reduced public confidence in medicine by way of the pandemic. 

“The hospital industry has moved away from its traditional charitable mission and toward a business orientation that is undeniable,” she said. “With the [pandemic] dust settling, I think a lot of people realize the clinicians are the heroes, but hospitals are maybe not as altruistic as they once thought.”

In 2021, over 70 percent of Americans said they trusted physicians and nurses, but only 22 percent said the same about hospital executives, according to a study from the University of Chicago and The Associated Press-NORC Center for Public Affairs Research. 

“It’s a tough job and a complicated business to run, and everybody in the community has an opinion about it based on anecdotal evidence,” Dr. Keckley said. “I think much of the blame too for hospitals taking a lot of hits has been boards that are not prepared to govern.”

For both Drs. Keckley and Bai, there are other major issues they each point to as contributing factors to the growing wariness around hospital operations: 

  • A lack of compliance with CMS price transparency rules. Some of the most recent studies estimate hospital compliance rates could range from 16 percent to 55 percent, while hospitals say the issue has been mischaracterized. CMS has penalized very few hospitals for noncompliance since the rule took effect in 2021.
  • The decades-long trend of consolidation hitting a tipping point. With consolidation, hospitals have long argued the trend would lead to more efficiency, care access, quality of care and lower costs. One of the most comprehensive consolidation studies to date was released Jan. 24 in JAMA and concluded that merged health systems have led to “marginally better care at significantly higher costs.”

    “Hospitals are doing exactly what they’re supposed to do — make money to survive and expand,” Dr. Bai said. “Instead of blaming individual players, we have to raise the bar and think about who created the system in the first place that makes competition so difficult — the government.”
  • State retirement benefits plans struggling financially. Though not a new trend, unfunded healthcare benefits promised to retired public employees and their dependents continues to grow around the country, incentivizing state lawmakers to look in new directions to save on costs. Unfunded retiree healthcare liabilities across all states surpassed $1 trillion in 2019, according to the American Legislative Exchange Council.
  • Competition from other healthcare sectors. Competition for patients has arrived from other healthcare sectors, especially from payers. In 2023, UnitedHealth Group’s Optum owns or is affiliated with the most physicians in the country at 60,000, though it’s likely higher after several large acquisitions last year.

“The center of gravity in healthcare has shifted from hospitals that muscled their way into scaling,” Dr. Keckley said. “The reality is that providing hospital services in non-hospital settings that are safe, effective and less costly is where the market, and insurers, are going.”

Despite the uptick in states and Americans that have gone into fault-finding mode against hospitals and those running them, operating a financially successful hospital or health system in 2023 is a monumental task, perhaps even close to impossible for many. Last year, approximately half of U.S. hospitals finished the year with a negative margin, making it “the worst financial year” for the industry since the start of the pandemic, according to Kaufman Hall’s latest “National Flash Hospital Report.”

“Hospitals aren’t going into this with a huge amount of goodwill at their backs, and I think that’s what they need to be prepared for,” Dr. Keckley said. “You can’t just go in and tell the story of ‘look at what we do for the community’ or ‘look at all the people we employ’ — that is not going to work anymore.”

U.S. healthcare: A conglomerate of monopolies

Posted on by • Posted in Competition, Cost Management, Cost Reduction, Dept of Justice (DOJ), Economies of Scale, Federal Trade Commission, Federal Trade Commission (FTC), Health System, Hospital, Hospital at Home, Hospital Industry, Innovation, Lack of Quality Improvement, Leadership, Market Consolidation, Mergers & Acquisitions, Monopoly, Monopoly Behavior, Quality Measures, Quality of Care, Seven-Day Hospital • 1 Comment
https://www.linkedin.com/pulse/us-healthcare-conglomerate-monopolies-robert-pearl-m-d-/?midToken=AQHcpzuK5TbmJA&midSig=13HLWaT6gWIaA1&trk=eml-email_series_follow_newsletter_01-newsletter_hero_banner-0-open_on_linkedin_cta&trkEmail=eml-email_series_follow_newsletter_01-newsletter_hero_banner-0-open_on_linkedin_cta-null-fll5j~lcytw335~rh-null-null&eid=fll5j-lcytw335-rh

The Taylor Swift ticketing debacle of 2022 left thousands of frustrated ‘Swifties’ without a chance to see their favorite artist in concert. And it also highlighted the trouble that arises when companies like Ticketmaster gain monopolistic control.

In any industry, market consolidation limits competition, choice and access to goods and services, all of which drive up prices.

But there’s another—often overlooked—consequence.

Market leaders that grow too powerful become complacent. And, when that happens, innovation dies. Healthcare offers a prime example.

And industry of monopolies

De facto monopolies abound in almost every healthcare sector: Hospitals and health systems, drug and device manufacturers, and doctors backed by private equity. The result is that U.S. healthcare has become a conglomerate of monopolies.  

For two decades, this intense concentration of power has inflicted harm on patients, communities and the health of the nation. For most of the 21st century, medical costs have risen faster than overall inflation, America’s life expectancy (and overall health) has stagnated, and the pace of innovation has slowed to a crawl.

 This article, the first in a series about the ominous and omnipresent monopolies of healthcare, focuses on how merged hospitals and powerful health systems have raised the price, lowered the quality and decreased the convenience of American medicine.

Future articles will look at drug companies who wield unfettered pricing power, coalitions of specialist physicians who gain monopolistic leverage, and the payers (businesses, insurers and the government) who tolerate market consolidation. The series will conclude with a look at who stands the best chance of shattering this conglomerate of monopolies and bringing innovation back to healthcare.

How hospitals consolidate power

The hospital industry is now home to a pair of seemingly contradictory trends. On one hand, economic losses in recent years have resulted in record rates of hospital (and hospital service) closures. On the other hand, the overall market size, value and revenue of U.S. hospitals are growing.

This is no incongruity. It’s what happens when hospitals and health systems merge and eliminate competition in communities.  

Today, the 40 largest health systems own 2,073 hospitals, roughly one-third of all emergency and acute-care facilities in the United States. The top 10 health systems own a sixth of all hospitals and combine for $226.7 billion in net patient revenues.

Though the Federal Trade Commission and the Antitrust Division of the DOJ are charged with enforcing antitrust laws in healthcare markets and preventing anticompetitive conduct, legal loopholes and intense lobbying continue to spur hospital consolidation. Rarely are hospital M&A requests denied or even challenged.

The ills of hospital consolidation

The rapid and recent increase in hospital consolidation has left hundreds of communities with only one option for inpatient care.

But the lack of choice is only one of the downsides.

Hospital administrators know that state and federal statutes require insurers and self-funded businesses to provide hospital care within 15 miles of (or 30 minutes from) a member’s home or work. And they understand that insurers must accept their pricing demands if they want to sell policies in these consolidated markets. As a result, studies confirm that hospital prices and profits are higher in uncompetitive geographies.

These elevated prices negatively impact the pocketbooks of patients and force local governments (which must balance their budgets) to redirect funds toward hospitals and away from local police, schools and infrastructure projects.

Perhaps most concerning of all is the lack of quality improvement following hospital consolidation. Contrary to what administrators claim, clinical outcomes for patients are no better in consolidated locations than in competitive ones—despite significantly higher costs.

How hospitals could innovate (and why they don’t)

Hospital care in the United States accounts for more than 30% of total medical expenses (about $1.5 trillion). Even though fewer patients are being admitted each year, these costs continue to rise at a feverish pace.

If our nation wants to improve medical outcomes and make healthcare more affordable, a great place to start would be to innovate care-delivery in our country’s hospitals.

To illuminate what’s possible, below are three practical innovations that would simultaneously improve clinical outcomes and lower costs. And yet, despite the massive benefits for patients, few hospital-system administrators appear willing to embrace these changes.

Innovation 1: Leveraging economies of scale

In most industries, bigger is better because size equals cost savings. This advantage is known as economies of scale.

Ostensibly, when bigger hospitals acquire smaller ones, they gain negotiating power—along with plenty of opportunities to eliminate redundancies. These factors could and should result in lower prices for medical care.

Instead, when hospitals merge, the inefficiencies of both the acquirer and the acquired usually persist. Rather than closing small, ineffective clinical services, the newly expanded hospital system keeps them open. That’s because hospital administrators prefer to raise prices and keep people happy rather than undergo the painstaking process of becoming more efficient.

The result isn’t just higher healthcare costs, but also missed opportunities to improve quality.

Following M&A, health systems continue to schedule orthopedic, cardiac and neurosurgical procedures across multiple low-volume hospitals. They’d be better off creating centers of excellence and doing all total joint replacements, heart surgeries and neurosurgical procedures in a single hospital or placing each of the three specialties in a different one. Doing so would increase the case volumes for surgeons and operative teams in that specialty, augmenting their experience and expertise—leading to better outcomes for patients.

But hospital administrators bristle at the idea, fearing pushback from communities where these services close.   

Innovation 2: Switching to a seven-day hospital

When patients are admitted on a Friday night, rather than a Monday or Tuesday night, they spend on average an extra day in the hospital.

This delay occurs because hospitals cut back services on weekends and, therefore, frequently postpone non-emergent procedures until Monday. For patients, this extra day in the hospital is costly, inconvenient and risky. The longer the patient stays admitted, the greater the odds of experiencing a hospital acquired infection, medical error or complications from underlying disease.

It would be possible for physicians and staff to spread the work over seven days, thus eliminating delays in care. By having the necessary, qualified staff present seven days a week, inpatients could get essential, but non-emergent treatments on weekends without delay. They could also receive sophisticated diagnostic tests and undergo procedures soon after admission, every day of the week. As a result, patients would get better sooner with fewer total inpatient days and far lower costs.  

Hospital administrators don’t make the change because they worry it would upset the doctors and nurses who prefer to work weekdays, not weekends.

Innovation 3: Bringing hospitals into homes

During Covid-19, hospitals quickly ran out of staffed beds. Patients were sent home on intravenous medications with monitoring devices and brief nurse visits when needed.

Clinical outcomes were equivalent to (and often better than) the current inpatient care and costs were markedly less.

Building on this success, hospitals could expand this approach with readily available technologies.

Whereas doctors and nurses today check on hospitalized patients intermittently, a team of clinicians set up in centralized location could monitor hundreds of patients (in their homes) around the clock.

By sending patients home with devices that continuously measure blood pressure, pulse and blood oxygenation—along with digital scales that can calibrate fluctuations in a patient’s weight, indicating either dehydration or excess fluid retention—patients can recuperate from the comforts of home. And when family members have questions or concerns, they can obtain assistance and advice through video.

Despite dozens of advantages, use of the “hospital at home” model is receding now that Covid-19 has waned.

That’s because hospital CEOs and CFOs are paid to fill beds in their brick-and-mortar facilities. And so, unless their facilities are full, they prefer that doctors and nurses treat patients in a hospital bed rather than in people’s own homes.

Opportunities for hospital innovations abound. These three are just a few of many changes that could transform medical care. Instead of taking advantage of them, hospital administrators continue to construct expensive new buildings, add beds and raise prices.

Federal Trade Commission (FTC) probing large anesthesia group

Posted on by • Posted in Federal Trade Commission, Federal Trade Commission (FTC), Market Consolidation, Market Power, Market Share, Mergers & Acquisitions, Monopoly, Monopoly Behavior, No Surprises Act, Private Equity • Leave a comment

https://mailchi.mp/b1e0aa55afe5/the-weekly-gist-october-7-2022?e=d1e747d2d8

The FTC is investigating US Anesthesia Providers (USAP), a private equity (PE)-backed group with 4.5K physicians working in nine states, over concerns of monopoly power in certain markets. The inquiry is focused on USAP’s acquisition history, which has followed the PE “playbook” of rolling up small anesthesiology groups into a single entity large enough to exert leverage in contract negotiations. USAP’s presence in Texas and Colorado is likely to be of particular interest, as it controls at least 30 percent of the anesthesiology market in both states. 

The Gist: Like many other PE-backed physician groups, USAP achieved market power mostly through myriad acquisitions too small to warrant regulatory attention on their own. The probe is in line with recent government scrutiny of private equity influence in the healthcare sector, and will no doubt be closely watched by investors and PE-backed groups.

If USAP is forced to divest from certain markets, the precedent could prove especially damaging to other rapidly growing investor-backed physician groups, particularly those staffing hospital functions, who are already being rocked by ramifications of the No Surprises Act. 

The Fed’s big mistake

Posted on by • Posted in Antitrust, Federal Reserve, Inflation, Market Consolidation, Market Power, Market Share, Monopoly, Monopoly Behavior, Profit Price Inflation, State of the Union, Wage Price Inflation • Leave a comment
https://robertreich.substack.com/p/the-feds-big-mistake?utm_source=email&s=r

The Federal Reserve just raised interest rates by three-quarters of a percentage point, the biggest single increase in interest rates since 1994. It’s another move in the Fed’s effort to tackle the fastest inflation in four decades.

I understand the Fed’s urgency, but it has entered dangerous territory. If the Fed continues down this path – as it has signaled it will – the economy will be plunged into a recession. Every time over the last half century the Fed has raised interest rates this much and this quickly, it has caused a recession.

Besides, interest rate increases will not remedy the major causes of the current inflation – huge pent-up worldwide demand from two years of pandemic, shortages of goods and services responding to that demand, Putin’s war in Ukraine, and big profitable corporations with enough pricing power to use inflation as a cover for pushing up prices even further.

The Fed assumes that price increases are being driven by wage increases — so-called “wage-price inflation.” That’s incorrect. Wages are lagging behind inflation. A more accurate description of what we’re now seeing might be called “profit-price inflation” — prices driven upward by corporations seeking increased profits. (See chart below, from the Economic Policy Institute.)

A recession will be especially harmful to people who are most vulnerable to downturns in the economy — who are the first to be fired (and last to be hired again when the economy turns upward): lower-wage workers, disproportionately women and people of color.  

The Fed is making a big mistake.

Charlotte, NC-based Atrium Health and Illinois- and Wisconsin-based Advocate Aurora Health announce plans to merge

Posted on by • Posted in Antitrust, Competition, Cultural Fit, Culture, Culture Compatibility, Federal Trade Commission (FTC), Health System, Hospital, Hospital Industry, Market Consolidation, Market Share, Market Trends, Mergers & Acquisitions, Monopoly, Monopoly Behavior • Leave a comment

The combined health system will become the sixth largest nationwide, with $27B in revenue and 67 hospitals across six Midwest and Southeast states. The system will be based in Charlotte, and known as Advocate Health, though Atrium will continue to use its name in its markets.

Atrium CEO Gene Woods is slated to ultimately lead the combined entity, after an 18-month co-CEO arrangement with Advocate Aurora CEO Jim Skogsbergh. While the cross-market merger is unlikely to create antitrust concerns about increased pricing leverage, the Biden administration has been making noises about applying stricter scrutiny to the impact of health system consolidation on labor market competition.  

The Gist: Earlier this year, Utah-based Intermountain Healthcare and Colorado-based SCL Health combined to create a 33-hospital, $14B health system, which became the 11th largest nationwide. While these mega-mergers of regional systems can realize cost savings from back-office synergies, there is a significant opportunity to create larger “platforms” of care to win consumer loyalty, deploy digital capabilities, attract talent, and become more desirable partners for nontraditional players like Amazon, Walmart, and One Medical.

It will be critical to watch whether the governance and cultural challenges that often hinder health system mergers come into play here. Advocate Aurora has had two prospective mergers fall apart in recent years, the first with Chicago-based NorthShore University HealthSystem, and the second with Michigan-based Beaumont Health (who subsequently finalized a merger with Spectrum Health earlier this year). 

But the combination with Atrium is structured as a joint operating agreement, essentially creating a new superstructure atop the two legacy systems. This may allow the combined entity more flexibility in local decision-making, but the ultimate question will be how the combined entity will create value for consumers. Time will tell.

Higher prices correlated with lower mortality in competitive hospital markets

Posted on by • Posted in Antitrust, Competition, Cost Management, Cost Reduction, Cost-Benefit Analysis, Health Policy, Health System, Hospital, Hospital Industry, Market Consolidation, Market Power, Market Share, Market Trends, Mergers & Acquisitions, Monopoly, Monopoly Behavior, Outcomes, Quality, Quality Measures, Quality of Care, Quality Reporting • Leave a comment

https://mailchi.mp/f6328d2acfe2/the-weekly-gist-the-grizzly-bear-conflict-manager-edition?e=d1e747d2d8

A National Bureau of Economic Research working paper found that higher-priced hospitals in competitive markets were associated with lower patient mortality—flying in the face of the common policy narrative that higher-priced care is not higher quality. However, in more concentrated, less-competitive healthcare markets (in which over two-thirds of the nation’s hospitals are located), the study found no correlation between price and quality. Authors of the study analyzed patient outcomes from more than 200K admissions among commercially insured patients, transported by ambulance to about 1,800 hospitals between 2007 and 2014.   

The Gist: As hospitals have consolidated, prices have risen by about 30 percent between 2015 to 2019, leading policy experts and regulators to search for ways to rein in price inflation. 

While there continues to be widespread consensus that industry consolidation has resulted in unsustainable cost growth, the new study’s findings bring a bit of welcome nuance around impact on quality and outcomes to an otherwise one-sided, price-centric policy narrative.

Can the F.T.C. Spur Healthcare Reform?

Posted on by • Posted in Antitrust, Competition, Federal Trade Commission (FTC), Health Policy, Healthcare Reform, Market Consolidation, Market Power, Market Share, Mergers & Acquisitions, Monopoly, Monopoly Behavior, Special Interest Groups • Leave a comment
https://fixushealthcare.blog/2022/03/11/can-the-f-t-c-spur-healthcare-reform/

“Follow the money,” was the advice of Deep Throat to the Watergate journalists. But now, new Federal Trade Commission Chair Lina Khan says that’s not enough when analyzing monopolies in both healthcare and rest of the economy. Follow the algorithms and follow the power, too, not just the money.

We all know how monopolies harm consumers with higher prices. But monopolies and powerful corporations cause harm in other ways. Some examples:

Not all of these examples are linked directly to potentially illegal anticompetitive activities. But all are linked to the exercise of insufficiently checked corporate power. Commissioner Khan has signaled that she will consider such harms when analyzing mergers and other potentially anticompetitive activities.

This expanded view of anticompetitive harm is a departure from Robert Bork’s more narrow approach to antitrust enforcement taken by the F.T.C. since publication of Bork’s 1978 book The Antitrust Paradox. Bork noted that in many cases, mergers resulted in economies of scale that lowered prices for consumers. By his standard, such mergers were permissible as benefiting the consumer.

But now Commissioner Khan – and others like-minded theorists called neo-Brandeisians – point to the other harmful effects beyond the seeming benefit of lower prices. For example, the flip-side of a monopoly’s position as seller is its monopsony as a purchaser of labor. If there is only one big potential employer, workers do not have a competitive labor market, depressing their bargaining power and wages. In the digital economy there is also potential jeopardy to data privacy and security, and coercion to use certain digital products. Think the teenage girls on Instagram.

Employees of a single powerful employer are also inhibited from rocking the boat with innovations, critiques, or whistleblowing. This enervates a truly competitive marketplace.

Commissioner Khan views the antitrust issue not as being one of bigness but rather of power, power that reduces true competition. Beyond merely looking at prices, she seeks to identify and quantify the other elements of power and competition.

This blog has implicated healthcare monopolies as one direct cause of relentless increases in spending. It has also embraced the view of Steven Brill that “over the last five decades a new ‘best and brightest’ meritocracy rigged not only healthcare, but also the entire American financial, legal, and political system to build ‘moats’ of protection to perpetuate their wealth and power.”

Commissioner Khan is now highlighting a key mechanism – anticompetitive political and financial power — by which healthcare corporations rig healthcare and by which other corporations have blocked reform in pursuit of short-sighted profits. She summarizes the remedy:

If you allow unfettered monopoly power to concentrate, its power can rival that of the state., right? And historically, the antitrust laws have a rich tradition and rich history, and a key goal was to ensure that our commercial sphere was characterized by the same types of checks and balances and protections against concentration of economic power that we had set up in our political and governance sphere. And so the desire to kind of check those types of concentrations of power, I think, is deep in the American tradition.

This blog thinks she is on the right track. Because healthcare reform is in the public interest and must be pursued even in the face of powerful special interests.

Take Action

Now, take action.

FTC sues to block Rhode Island’s largest health systems from merging

Posted on by • Posted in Antitrust, Competition, Dept of Justice (DOJ), Federal Trade Commission (FTC), Market Consolidation, Market Power, Mergers & Acquisitions, Monopoly, Monopoly Behavior • Leave a comment
https://www.healthcaredive.com/news/ftc-sues-block-rhode-island-hospital-merger/619091/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202022-02-18%20Healthcare%20Dive%20%5Bissue:39885%5D&utm_term=Healthcare%20Dive

Dive Brief:

  • The Federal Trade Commission is suing to block Rhode Island’s two largest health systems from merging, alleging the tie-up between Lifespan and Care New England would increase prices and diminish the quality of care.
  • In the state’s own review, Rhode Island’s attorney general said the union would result in “extraordinary market power” and denied the merger application under state law that requires a review of such tie-ups. Rhode Island’s attorney general will join FTC’s federal lawsuit seeking to block the deal.
  • The FTC alleges that, together, Lifespan and Care New England would control at least 70% of Rhode Island’s market for inpatient hospital services and also reduce competition in several nearby Massachusetts communities.

Dive Insight:

The union between Lifespan, the state’s largest health system, and Care New England, the second largest, quickly raised alarms in Rhode Island.

A 25-page report from the state’s insurance department found that the merger would “significantly alter” the state’s healthcare market, which currently enjoys a “relatively competitive” market. State regulators were also concerned about the control the new system would have over physician services. Given these risks, the state insurance commissioner proposed a set of conditions on the deal including price caps. Health system executives were open to working under certain conditions.

However, executives seemed surprise by Thursday’s announcement that the deal to create an integrated academic medical system with Brown University at the forefront would be blocked.

“On four separate occasions in prior years, the FTC reviewed the same proposed merger and allowed it to proceed,” a joint statement released Thursday said. The management teams said they offered up 30 conditions to regulators to satisfy antitrust concerns about the merger, “but neither the FTC or the AG ever discussed these conditions or others with the two systems prior to today’s decisions,” according to the statement.

After flirting with the idea of combining the systems for years, Lifespan and Care New England inked a deal to merge last February after the coronavirus pandemic revived talks.

The two touted the deal as a way to create an integrated academic health system with Brown University’s medical school in a central role. Brown University committed $125 million to the creation of the new system.

However, FTC commissioners voted unanimously to block the union over concerns it would extinguish competition between the two.

And although regulators have long leaned on the argument that hospital mergers lead to higher prices, a joint letter from FTC Chair Lina Khan and Commissioner Rebecca Kelly Slaughter points to the harmful effects consolidation has on labor markets, an argument growing in importance within the agency. 

“Just as we want firms to compete with each other to sell goods and services to their customers, we want employers to compete with each other to attract and retain workers,” the letter states. “Indeed, there is a growing body of empirical research about the potential for competitive harm to labor markets from consolidation and concentration.”

The news follows reports that the Department of Justice is preparing to sue to stop UnitedHealth Group’s blockbuster acquisition of Change Healthcare, a healthcare technology firm. Concerned about the “massive consolidation” of healthcare data, the American Hospital Association urged antitrust regulators to thoroughly examine the proposed transaction in a letter sent to DOJ last spring.

After taking office, President Joe Biden has signaled his administration would take an aggressive antitrust stance, including getting tough on hospital mergers. Last summer, the president issued an executive order that called on antitrust regulators to “review and revise” merger guidelines to ensure patients are not harmed by proposed deals.

Biden specifically called out the healthcare industry, rife with consolidation and accompanying research that shows hospital unions lead to higher prices.

“Thanks to unchecked mergers, the ten largest healthcare systems now control a quarter of the market,” the release from the White House said.

Still, the FTC has become overwhelmed by the sheer number of proposed transactions. In August, the agency said it was hit by a “tidal wave” of merger filings and warned applicants it may not vet all submissions before the applicable deadlines. But in letters sent to merging companies, the FTC warned the delay should not be interpreted as a green light for any deal.

“Companies that choose to proceed with transactions that have not been fully investigated are doing so at their own risk,” the regulator said in a statement.

AMA report: U.S. has “highly concentrated” payer markets that stifle competition  

Posted on by • Posted in ACA, America's Health Insurance Plans (AHIP), American Medical Association (AMA), Competition, Federal Trade Commission (FTC), Health Insurance Coverage Adequacy, Health Insurance Industry, Health Policy, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, Market Consolidation, Market Failure, Market Power, Market Share, Market Trends, Mergers & Acquisitions, Monopoly, Monopoly Behavior, Out of Network, Out of Pocket Expenses, Surprise Bills • Leave a comment

https://medcitynews.com/2021/10/ama-report-u-s-has-highly-concentrated-payer-markets-that-stifle-competition/?utm_campaign=MCN%20Daily%20Top%20Stories&utm_medium=email&hsmi=166812730&_hsenc=p2ANqtz–Z_7y9-ZOPkhC7HI4RXSwuM5xDzd2B0uZi9sApeW1J89hQBktG-rqujxpBFiXmxEEnaK77vlq-7vHhr-qK8mxRgBmwA&utm_content=166812730&utm_source=hs_email

About 73% of health insurance markets are highly concentrated, and in 46% of markets, one insurer had a share of 50% or more, a new report from the American Medical Association shows. The report comes a few months after President Joe Biden directed federal agencies to ramp up oversight of healthcare consolidation.

The majority of health insurance markets in the U.S. are highly concentrated, curbing competition, according to a report released by the American Medical Association.

For the report, researchers reviewed market share and market concentration data for the 50 states and District of Columbia, and each of the 384 metropolitan statistical areas in the country.

They found that 73% of the metropolitan statistical area-level payer markets were highly concentrated in 2020. In 91% of markets, at least one insurer had a market share of 30%, and in 46% of markets, one insurer had a share of 50% or more.

Further, the share of markets that are highly concentrated rose from 71% in 2014 to 73% last year. Of those markets that were not highly concentrated in 2014, 26% experienced an increase large enough to enter the category by 2020.

In terms of national-level market shares of the 10 largest U.S. health insurers, UnitedHealth Group comes out on top with the largest market share in both 2014 and 2020, reporting 16% and 15% market share, respectively. Anthem comes in second with shares of 13% in 2014 and 12% in 2020.

But the picture looks different when it comes to the market share of health insurers participating in the Affordable Care Act individual exchanges. In 2014, Anthem held the largest market share among the top 10 insurers on the exchanges, with a share of 14%. By 2020, Centene had taken the top spot, with a share of 18%, while Anthem had slipped to fifth place, with a share of just 4%.

Another key entrant into the top 10 list in 2020 was insurance technology company Oscar Health, with 3% of the market share in the exchanges at the national level.

“These [concentrated] markets are ripe for the exercise of health insurer market power, which harms consumers and providers of care,” the report authors wrote. “Our findings should prompt federal and state antitrust authorities to vigorously examine the competitive effects of proposed mergers involving health insurers.”

The payer industry hit back. In a statement provided to MedCity News, America’s Health Insurance Plans, a national payer association, said that Americans have many affordable choices for their coverage, pointing to the fact that CMS announced average premiums for Medicare Advantage plans will drop to $19 per month in 2022 from $21.22 this year.

“Health insurance providers are an advocate for Americans, fighting for lower prices and more choices for them,” said Kristine Grow, senior vice president of communications at America’s Health Insurance Plans, in an email. “We negotiate lower prices with doctors, hospitals and drug companies, and consumers benefit from lower premiums as a result.”

Further, the report does not mention the provider consolidation that also contributes to higher healthcare prices. Mergers and acquisitions among hospitals and health systems have continued steadily over the past decade, remaining relatively impervious to even the Covid-19 pandemic.

Scrutiny around consolidation in the healthcare industry may grow. In July, President Joe Biden issued an executive order urging federal agencies to review and revise their merger guidelines through the lens of preventing patient harm.

The Federal Trade Commission has already said that healthcare businesses will be one of its priority targets for antitrust enforcement actions.

Hospital mergers and acquisitions are a bad deal for patients. Why aren’t they being stopped?

Posted on by • Posted in Competition, Dept of Justice (DOJ), Evidence Based Decision Making, Evidence-Based Care, Evidence-based Leadership, Evidence-Based Plan, Evidence-Based Policy, Federal Trade Commission (FTC), Health Insurance Coverage Adequacy, Health Policy, Hidden Fees, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, Market Consolidation, Market Power, Market Share, Market Trends, Mergers & Acquisitions, Monopoly, Monopoly Behavior, Out of Pocket Expenses, Pricing, Pricing Leverage, Quality of Care • Leave a comment
Hospital mergers and acquisitions are a bad deal for patients. Why aren’t they being stopped?

Contrary to what health care executives advertise, hospital mergers and acquisitions aren’t good for patients. They rarely improve access to health care or its quality, and they don’t reduce prices. But the system in place to stop them is often more bark than bite.

During 2019 and 2020, hospitals acquired an additional 3,200 medical practices and 18,600 physicians. By January 2021, almost half of all U.S. physicians were employed by a hospital or health system.

In 2018, the last year for which complete data are available, 72% of hospitals and more than 90% of hospital beds were affiliated with a health care system. Mergers and acquisitions are increasing the number of health care systems while decreasing the number of independently operated hospitals.

When hospitals buy provider practices, it leads to more unnecessary care and more expensive care, which increases overall spending. The same thing happens when hospitals merge or acquire other hospitals. These deals often increase prices and they don’t improve care quality; patients simply pay more for the same or worse care.

Mergers and acquisitions can negatively affect clinician morale as well. Some argue they lead to providers’ loss of autonomy and increase the emphasis on financial targets rather than patient care. They can also contribute to burnout and feeling unsupported.

Considerable machinery is in place at both the federal and state levels to stop “anticompetitive” mergers before they happen. But that machinery is limited by a lack of follow through.

The Federal Trade Commission (FTC) and the U.S. Department of Justice have always had broad authority over mergers. By law, one or both of these entities must review for any antitrust concerns proposed deals of a certain size before the deals are finalized. After a preliminary review, if no competition issues are identified, the merger or acquisition is allowed to proceed. This is what happens in most cases. If concerns are raised, however, the involved parties must submit additional information and undergo a second evaluation.

Some health care organizations seem willing to challenge this process. Leaders involved in a pending merger between Lifespan and Care New England in Rhode Island — which would leave 80% of the state’s inpatient market under one company’s umbrella — are preparing to move forward even if the FTC deems the deal anticompetitive. The companies will simply ask the state to approve the merger despite the FTC’s concerns.

The reality is that the FTC’s reach is limited when it comes to nonprofits, which most hospitals are. While the FTC can oppose anticompetitive mergers involving nonprofits, it cannot enforce action against them for anticompetitive behavior. So if a merger goes through, the FTC has limited authority to ensure the new entity plays fairly.

What’s more, the FTC has acknowledged it can’t keep up with its workload this year. It modified its antitrust review process to accommodate an increasing number of requests and its stagnant capacity. In July, the Biden administration issued an executive order about economic competition that explicitly acknowledges the negative impact of health care consolidation on U.S. communities. This is encouraging, signaling that the government is taking mergers seriously. Yet it’s unclear if the executive order will give the FTC more capacity, which is essential if it is to actually enforce antitrust laws.

At the state level, most of the antitrust power lies with the attorney general, who ultimately approves or challenges all mergers. Despite this authority, questionable mergers still go through.

In 2018, for example, two competing hospital systems in rural Tennessee merged to become Ballad Health and the only source of care for about 1.2 million residents. The deal was opposed by the FTC, which deemed it to be a monopoly. Despite the concerns, the state attorney general and Department of Health overrode the FTC’s ruling and approved the merger. (This is the same mechanism the Rhode Island hospitals hope to employ should the FTC oppose their merger.) As expected, Ballad Health then consolidated the services offered at its facilities and increased the fees on patient bills.

It’s clear that mechanisms exist to curb potentially harmful mergers and promote industry competition. It’s also clear they aren’t being used to the fullest extent. Unless these checks and balances lead to mergers being denied, their power over the market is limited.

Experts have been raising the alarm on health care consolidation for years. Mergers rarely lead to better care quality, access, or prices. Proposed mergers must be assessed and approved based on evidence, not industry pressure. If nothing changes, the consequences will be felt for years to come.