Regulators sued the PE firm last year for consolidating anesthesiology services in Texas with its portfolio company, U.S. Anesthesia Partners. Now, a judge is holding Welsh Carson blameless.
A Texas federal judge has dismissed the Federal Trade Commission’s antitrust lawsuit against Welsh, Carson, Anderson and Stowe in a big win for the private equity firm. However, the government’s suit against Welsh Carson’s portfolio company U.S. Anesthesia Partners was allowed to continue.
Last year, the FTC sued Welsh Carson and USAP, alleging they pursued a buying spree of anethesiology practices in Texas to create a dominant provider that used its market power to suppress competition and increase the cost of anesthesiology services.
Welsh Carson, which formed USAP in 2012, has since whittled down its ownership of the provider from more than 50% to 23%, and argued that precludes it from being included in the suit. The FTC argued the firm effectively remains in control of USAP.
However, U.S. District Judge Kenneth Hoyt granted Welsh Carson’s motion to dismiss the suit on Tuesday, essentially finding that private equity firms are not liable for the actions of their portfolio companies.
The FTC was unable to prove “any authority for the proposition that receiving profits from an entity that may be violating antitrust laws is itself a violation of antitrust laws,” Hoyt wrote in his opinion.
Hoyt found that Welsh Carson holding a minority share in USAP does not reduce competition, despite USAP’s acquisitions potentially being anticompetitive themselves. In addition, comments from Welsh Carson executives expressing a desire to consolidate other healthcare markets don’t show that the PE firm plans to violate antitrust laws.
If Welsh Carson signals “beyond mere speculation and conjecture” that it’s actually about to violate the law, the FTC can lodge a new lawsuit, the judge wrote.
A spokesperson for Welsh Carson said the firm is “gratified” that the court dismissed the case.
”As we have said from the beginning, this case was without factual or legal basis,” the spokesperson said.
However, Hoyt denied USAP’s motion to dismiss.
The FTC is arguing that USAP — which is the largest anesthesia practice in Texas — leveraged its size to raise prices in the state, resulting in patients, employers and insurers paying tens of millions of dollars more each year for anesthesia services. In addition, USAP allegedly paid a competitor, Envision Healthcare, $9 million to stay out of the Dallas market for five years.
USAP has been criticized for using similar practices to grow in other states, including Colorado.
USAP argued the FTC was overreaching its authority, and regulators’ allegations of anticompetitive conduct were meritless. Hoyt disagreed, pointing out that USAP continues to own the acquired anesthesia groups and continues to charge high prices, including under price-setting agreements. Overall, USAP’s “monopolization scheme remains intact,” according to the opinion.
“The FTC has plausibly alleged acquisitions resulting in higher prices for consumers, along with a market allocation and price-setting scheme. It would be premature to dismiss these claims at this stage,” Hoyt said.
Either way, the dismissal against Welsh Carson is a setback for the FTC, which has taken a more aggressive stance against anticompetitive behaviors in the healthcare industry under the Biden administration.
In December, the FTC and the Department of Justice finalized new guidelines for merger reviews taking aim at previously overlooked practices. Those include private equity roll-ups, when firms acquire and merge multiple small businesses into one larger company — like Welsh Carson’s strategy to grow USAP.
PE firms have acquired hundreds of physician practices across the U.S. in recent years, despite controversy over negative effects on medical quality and cost. One study from 2022 found when private equity took over physician practices, they raised prices by 20% on average.
The U.S. Department of Justice has announced the formation of the Antitrust Division’s Task Force on Health Care Monopolies and Collusion (HCMC), which will guide the division’s enforcement strategy and policy approach in healthcare.
This will include facilitating policy advocacy, investigations and, where warranted, civil and criminal enforcement in healthcare markets.
“Every year, Americans spend trillions of dollars on healthcare, money that is increasingly being gobbled up by a small number of payers, providers and dominant intermediaries that have consolidated their way to power in communities across the country,” said Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division.
The task force is intended to identify and root out monopolies, as well as any collusive practices that increase costs and decrease quality, according to the DOJ.
WHAT’S THE IMPACT
The HCMC will consider widespread competition concerns shared by patients, healthcare professionals, businesses and entrepreneurs, including issues regarding payer-provider consolidation, serial acquisitions, labor and quality of care, medical billing, healthcare IT services, and access to and misuse of healthcare data.
The task force will also bring together civil and criminal prosecutors, economists, healthcare industry experts, technologists, data scientists, investigators and policy advisors from across the division’s Civil, Criminal, Litigation and Policy Programs, and the Expert Analysis Group to identify and address pressing antitrust problems in healthcare markets.
The HCMC will be directed by Katrina Rouse, a long-serving antitrust prosecutor who joined the Antitrust Division in 2011. She previously served as chief of the division’s Defense, Industrials and Aerospace Section, assistant chief of the division’s San Francisco office, and a special assistant U.S. attorney and a trial attorney in the division’s Healthcare and Consumer Products Section.
Rouse holds degrees from Columbia University and Stanford Law School, and has clerked for federal judges in the U.S. District Court for the District of Maryland and the U.S. Court of Appeals for the Fifth Circuit. She will also serve as the division’s deputy director of civil enforcement and special counsel for healthcare.
The Antitrust Division said it welcomes input from the public, including from practitioners, patients, researchers, business owners and others who have direct insight into competition concerns in the healthcare industry.
Where appropriate, the division will refer matters to other federal and state law enforcers, the DOJ said.
Members of the public can share their experiences with the task force by visiting HealthyCompetition.gov.
THE LARGER TREND
Healthcare monopolies, which can be spurred by hospital consolidation, could have a detrimental effect on consumers’ premiums and out-of-pocket spending due to the resulting outpatient facility fees, a 2023 report found.
Consumer advocates, payers and state regulators flagged a range of issues related to outpatient facility fees. Both consumer advocates and regulators expressed concerns about the financial exposure facility fees created for consumers via increased out-of-pocket spending – driven by plans with high deductibles and other benefit design features that increase patients’ exposure to cost-sharing – and higher premiums resulting from increased spending on ambulatory services.
The Department of Justice (DOJ) has been investigating UHG for anticompetitive behavior since last October, as first revealed by the Examiner News earlier this week and subsequently confirmed by the Wall Street Journal.
The DOJ is reportedly interested in Optum’s acquisitions of physician groups and how their relationships with UHG’s health plans affects competition.
The probe appears to be wide-ranging, but there are no indications of if or when the DOJ plans to file charges. UHG is no stranger to antitrust attention: the DOJ failed to block its purchase of Change Healthcare in 2022, and its planned acquisition of home healthcare company Amedisys is still subject to a federal probe.
The Gist: The Biden administration has made antitrust scrutiny a key plank of its policy platform, having recently launched high-profile investigations into several large companies including Apple, Amazon, and Google.
Although these probes span major sectors of the US economy, healthcare consolidation has been a particular focus for the White House.
As the nation’s both largest employer of physicians and largest health insurance company,UHG is an unsurprising target within the healthcare industry. Recently finalized federal merger guidelines have changed how the DOJ and Federal Trade Commission (FTC) gather M&A information, but not the laws or legal precedent upon which cases are ruled, so it remains to be seen if regulators’ new approach will translate into stronger enforcement.
Dallas, TX-based US Anesthesia Partners (USAP), one of the nation’s largest providers of anesthesia services, reached a settlement with the Colorado Attorney General’s Office, which had alleged that USAP engaged in anticompetitive behavior in the state.
Although it denies any wrongdoing, USAP agreed to relinquish exclusive contracts with five Colorado hospitals and revise its practice of adding noncompete agreements to its physician contracts.
This settlement is separate from the similar FTC suit against USAP and its creator-turned-minority owner, private-equity (PE) firm Welsh, Carson, Anderson, and Stowe. That suit, filed in federal district court in Texas in September 2023, alleges that USAP monopolized the Texas anesthesiology market in order to drive up prices unlawfully.
The Gist:USAP isn’t the only large anesthesia group in the news this week for allegations of anticompetitive behavior—hospitals in New York and Florida are suing North American Partners in Anesthesia, claiming it stifles competition by forcing its physicians to sign noncompete agreements.
Health systems and regulators are increasingly dissatisfied with the highly concentrated anesthesia provider market, which has become dominated by large, PE-backed groups.
Because the Colorado case was settled out of court, no precedent has been established for antitrust enforcement, but the result of the ongoing FTC suit against USAP may have significant ramifications for other large, PE-backed physician organizations.
The lawsuit filed in federal court seeks to represent thousands of other UPMC employees.
Dive Brief:
A nurse is suing the University of Pittsburgh Medical Center for allegedly leveraging its monopoly control over the employment market in Pennsylvania to keep wages down and prevent workers from leaving for competitors, all while increasing their workload.
The lawsuit, filed late last week in a federal court, seeks class action status to represent other staff at the nonprofit health system. Plaintiff Victoria Ross, who worked as a nurse at UPMC Hamot in Erie, Pennsylvania, seeks damages and is asking the judge to enjoin UPMC from continuing its unfair business practices.
If granted class action status, the lawsuit could represent thousands of current and former UPMC workers, including registered nurses, medical assistants and orderlies. UPMC has denied the allegations in statements to other outlets but did not respond to a request for comment by time of publication.
Dive Insight:
UPMC has grown steadily over the past few decades into the largest private employer in Pennsylvania, employing 95,000 workers overall.
From 1996 to 2018, the system acquired 28 competing healthcare providers, greatly expanding its market power, according to the lawsuit. The acquisitions also shrunk the availability of healthcare services. Over the same period, UPMC closed four hospitals and downsized operations in three other facilities, eliminating 1,800 full- and part-time jobs, the lawsuit said.
UPMC relied on “draconian” mobility restrictions and labor law violations to lock employees into lower pay and subcompetitive working conditions, according to the 44-page complaint.
Specifically, the system enacted restraints like noncompete clauses and “do-not-rehire blacklists” to stop workers from leaving. Meanwhile, UPMC allegedly suppressed workers’ labor law rights to prevent them from unionizing.
“Each of these restraints alone is anticompetitive, but combined, their effects are magnified.UPMC wielded these restraints together as a systemic strategy to suppress worker bargaining power and wages,” the lawsuit said. “As a result, UPMC’s skilled healthcare workers were required to do more while earning less — while they were also subjected to increasingly unfair and coercive workplace conditions.”
According to the complaint, UPMC has faced 133 unfair labor practice charges since 2012, and 159 separate allegations. Roughly 74% of the violations were related to workers’ efforts to unionize, the lawsuit said.
Meanwhile, UPMC workers’ wages have fallen at a rate of 30 to 57 cents per hour on average compared to other hospital workers for every 10% increase in UPMC’s market share, said the lawsuit, citing a consultant’s economic analysis.
The lawsuit also noted that UPMC’s staffing ratios have been decreasing, even as staffing ratios on average have increased at other Pennsylvania hospitals.
The alleged labor abuses and UPMC’s market power are linked, according to the complaint.
“Had UPMC been subject to competitive market forces, it would have had to raise wages to attract more workers and provide higher staffing levels in order to avoid degrading the care it provided to its patients, and in order to prevent losing patients to competitors who could provide better quality care,” the lawsuit said.
UPMC is facing similar labor allegations. In May, two unions filed a complaint asking the Department of Justice to investigate labor abuses at the nonprofit.
Hospitals were plagued by staffing shortages during the COVID-19 pandemic. Many facilities still bemoan the difficulty of hiring and retaining full-time workers, and point to shortages (of nurses in particular) as the reason for overworked employees and poor staffing ratios.
Yet some studies suggest that’s not the case. One recent analysis of Bureau of Labor Statistics data found employment in hospitals — including registered nurses — is now slightly higher than it was at the start of the pandemic.
Despite the controversy, UPMC — which now operates 40 hospitals with annual revenue of $26 billion — continues to try and expand its market share. Late last year, the system signed a definitive agreement to acquire Washington Health Care Services, a Pennsylvania system with more than 2,000 employees and two hospitals. The deal faces pushback from local unions.
This discussion was recorded on November 16, 2023. This transcript has been edited for clarity.
Robert D. Glatter, MD: Welcome. I’m Dr Robert Glatter, medical advisor for Medscape Emergency Medicine. Joining me today is Dr Brian Miller, a hospitalist with Johns Hopkins University School of Medicine and a health policy expert, to discuss the current and renewed interest in physician-owned hospitals.
Welcome, Dr Miller. It’s a pleasure to have you join me today.
Brian J. Miller, MD, MBA, MPH: Thank you for having me.
History and Controversies Surrounding Physician-Owned Hospitals
Miller: Thank you. I should note that my views are my own and don’t represent those of Hopkins or the American Enterprise Institute, where I’m a nonresident fellow nor the Medicare Payment Advisory Commission, of which I’m a Commissioner.
The story about physician-owned hospitals is an interesting one. Hospitals turned into health systems in the 1980s and 1990s, and physicians started to shift purely from an independent model into a more organized group practice or employed model. Physicians realized that they wanted an alternative operating arrangement. You want a choice of how you practice and what your employment is. And as community hospitals started to buy physicians and also establish their own physician groups de novo, physicians opened physician-owned hospitals.
Physician-owned hospitals fell into a couple of buckets. One is what we call community hospitals, or what the antitrust lawyers would call general acute care hospitals: those offering emergency room (ER) services, labor and delivery, primary care, general surgery — the whole regular gamut, except that some of the owners were physicians.
The other half of the marketplace ended up being specialty hospitals: those built around a specific medical specialty and series of procedures and chronic care. For example, cardiac hospitals often do CABG, TAVR, maybe abdominal aortic aneurysm (triple A) repairs, and they have cardiology clinics, cath labs, a cardiac intensive care unit (ICU), ER, etc. There were also orthopedic surgical specialty hospitals, which were sort of like an ambulatory surgery center (ASC) plus several beds. Then there were general surgical specialty hospitals. At one point, there were some women’s health–focused specialty hospitals.
The hospital industry, of course, as you can understand, didn’t exactly like this. They had a series of concerns about what we would historically call cherry-picking or lemon-dropping of patients. They were worried that physician-owned facilities didn’t want to serve public payer patients, and there was a whole series of reports and investigations.
Around the time the Affordable Care Act passed, the hospital industry had many concerns about physician-owned specialty hospitals, and there was a moratorium as part of the 2003 Medicare Modernization Act. As part of the bargaining over the hospital industry support for the Affordable Care Act, they traded their support for, among other things, their number one priority, which is a statutory prohibition on new or expanded physician-owned hospitals from participating in Medicare. That included both physician-owned community hospitals and physician-owned specialty hospitals.
Glatter: I guess the main interest is that, when physicians have an ownership or a stake in the hospital, this is what the Stark laws obviously were aimed at. That was part of the impetus to prevent physicians from referring patients where they had an ownership stake. Certainly, hospitals can be owned by attorneys and nonprofit organizations, and certainly, ASCs can be owned by physicians. There is an ongoing issue in terms of physicians not being able to have an ownership stake. In terms of equity ownership, we know that certain other models allow this, but basically, it sounds like this is an issue with Medicare. That seems to be the crux of it, correct?
Miller: Yes. I would also add that it’s interesting when we look at other professions. When we look at lawyers, nonlawyers are actually not allowed to own an equity stake in a law practice. In many other professions, you either have corporate ownership or professional ownership, or the alternative is you have only professional ownership.I would say the hospital industry is one of the few areas where professional ownership not only is not allowed, but also is statutorily prohibited functionally through the Medicare program.
Unveiling the Dynamics of Hospital Ownership
Glatter: A recent study done by two PhDs looked at 2019 data on 20 of the most expensive diagnosis-related groups (DRGs). It examined the cost savings, and we’re talking over $1 billion in expenditures when you look at the data from general acute care hospitals vs physician-owned hospitals. This is what appears to me to be a key driver of the push to loosen restrictions on physician-owned hospitals. Isn’t that correct?
Miller: I would say that’s one of many components. There’s more history to this issue. I remember sitting at a think tank talking to someone several years ago about hospital consolidation as an issue. We went through the usual levers that us policy wonks go through. We talked about antitrust enforcement, certificate of need, rising hospital costs from consolidation, lower quality (or at least no quality gains, as shown by a New England Journal of Medicine study), and decrements in patient experience that result from the diseconomies of scale. They sort of pooh-poohed many of the policy ideas. They basically said that there was no hope for hospital consolidation as an issue.
Well, what about physician ownership? I started with my research team to comb through the literature and found a variety of studies — some of which were sort of entertaining, because they’d do things like study physician-owned specialty hospitals, nonprofit-owned specialty hospitals, and for-profit specialty hospitals and compare them with nonprofit or for-profit community hospitals, and then say physician-owned hospitals that were specialty were bad.
They mixed ownership and service markets right there in so many ways, I’m not sure where to start. My team did a systematic review of around 30 years of research, looking at the evidence base in this space. We found a couple of things.
We found that physician-owned community hospitals did not have a cost or quality difference, meaning that there was no definitive evidence that the physician-owned community hospitals were cheaper based on historical evidence, which was very old. That means there’s not specific harm from them. When you permit market entry for community hospitals, that promotes competition, which results in lower prices and higher quality.
Then we also looked at the specialty hospital markets — surgical specialty hospitals, orthopedic surgical specialty hospitals, and cardiac hospitals. We noted for cardiac hospitals, there wasn’t clear evidence about cost savings, but there was definitive evidence of higher quality, from things like 30-day mortality for significant procedures like treatment of acute MI, triple A repair, stuff like that.
For orthopedic surgical specialty hospitals, we noted lower costs and higher quality, which again fits with operationally what we would know. If you have a facility that’s doing 20 total hips a day, you’re creating a focused factory. Just like if you think about it for interventional cardiology, your boards have a minimum number of procedures that you have to do to stay certified because we know about the volume-quality relationship.
Then we looked at general surgical specialty hospitals. There wasn’t enough evidence to make a conclusive thought about costs, and there was a clear trend toward higher quality. I would say this recent study is important, but there is a whole bunch of other literature out there, too.
Exploring the Scope of Emergency Care in Physician-Owned Hospitals
One thing I want to bring up — and this is an important issue — is that the risk for patients has been talked about by the American Hospital Association and the Federation of American Hospitals, in terms of limited or no emergency services at such physician-owned hospitals and having to call 911 when patients need emergent care or stabilization. That’s been the rebuttal, along with an Office of Inspector General (OIG) report from 2008. Almost, I guess, three quarters of the patients that needed emergent care got this at publicly funded hospitals.
Miller: I’m familiar with the argument about emergency care. If you actually go and look at it, it differs by specialty market. Physician-owned community hospitals have ERs because that’s how they get their business. If you are running a hospital medicine floor, a general surgical specialty floor, you have a labor delivery unit, a primary care clinic, and a cardiology clinic. You have all the things that all the other hospitals have. The physician-owned community hospitals almost uniformly have an ER.
When you look at the physician-owned specialty hospitals, it’s a little more granular. If you look at the cardiac hospitals, they have ERs. They also have cardiac ICUs, operating rooms, etc. The area where the hospital industry had concerns — which I think is valid to point out — is that physician-owned orthopedic surgical specialty hospitals don’t have ERs. But this makes sense because of what that hospital functionally is: a factory for whatever the scope of procedures is, be it joint replacements or shoulder arthroscopy. The orthopedic surgical specialty hospital is like an ASC plus several hospital beds. Many of those did not have ERs because clinically it didn’t make sense.
What’s interesting, though, is that the hospital industry also operates specialty hospitals. If you go into many of the large systems, they have cardiac specialty hospitals and cancer specialty hospitals. I would say that some of them have ERs, as they appropriately should, and some of those specialty hospitals do not. They might have a community hospital down the street that’s part of that health system that has an ER, but some of the specialty hospitals don’t necessarily have a dedicated ER.
I agree, that’s a valid concern. I would say, though, the question is, what are the scope of services in that hospital? Is an ER required? Community hospitals should have ERs. It makes sense also for a cardiac hospital to have one. If you’re running a total joint replacement factory, it might not make clinical sense.
Glatter: The patients who are treated at that hospital, if they do have emergent conditions, need to have board-certified emergency physicians treating them, in my view because I’m an ER physician. Having surgeons that are not emergency physicians staff a department at a specialty orthopedic hospital or, say, a cancer hospital is not acceptable from my standpoint. That’s my opinion and recommendation, coming from emergency medicine.
Miller: I would say that anesthesiologists are actually highly qualified in critical care. The question is about clinical decompensation; if you’re doing a procedure, you have an anesthesiologist right there who is capable of critical care. The function of the ER is to either serve as a window into the hospital for patient volume or to serve as a referral for emergent complaints.
Glatter: An anesthesiologist — I’ll take issue with that — does not have the training of an emergency physician in terms of scope of practice.
Miller: My anesthesiology colleagues would probably disagree for managing an emergency during an operating room case.
Glatter: Fair enough, but I think in the general sense. The other issue is that, in terms of emergent responses to patients that decompensate, when you have to transfer a patient, that violates Medicare requirements. How is that even a valid issue or argument if you’re going to have to transfer a patient from your specialty hospital? That happens. Again, I know that you’re saying these hospitals are completely independent and can function, stabilize patients, and treat emergencies, but that’s not the reality across the country, in my opinion.
Miller: I don’t think that’s the case for the physician-owned specialty cardiac hospitals, for starters. Many of those have ICUs in addition to operating rooms as a matter of routine in addition to ERs. I don’t think that’s the case for physician-owned community hospitals, which have ERs, ICUs, medicine floors, and surgical floors. Physician-owned community hospitals are around half the market. Of that remaining market, a significant percentage are cardiac hospitals. If you’re taking an issue with orthopedic surgical specialty hospitals, that’s a clinical operational question that can and should be answered.
I’d also posit that the nonprofit and for-profit hospital industries also operate specialty hospitals. Any of these questions, we shouldn’t just be asking about physician-owned facilities; we should be asking about them across ownership types, because we’re talking about scope of service and quality and safety. The ownership in that case doesn’t matter. The broader question is, are orthopedic surgical specialty hospitals owned by physicians, tax-exempt hospitals, or tax-paying hospitals? Is that a valid clinical business model? Is it safe? Does it meet Medicare conditions of participation? I would say that’s what that question is, because other ownership models do operate those facilities.
Glatter: You make some valid points, and I do agree on some of them. I think that, ultimately, these models of care, and certainly cost and quality, are issues. Again, it goes back to being able, in my opinion, to provide emergent care, which seems to me a very important issue.
Miller: I agree that providing emergent care is an issue. It’s an issue in any site of care. The hospital industry posits that all hospital outpatient departments (HOPDs) have emergent care. I can tell you, having worked in HOPDs (I’ve trained in them during residency), the response if something emergent happens is to either call 911 or wheel the patient down to the ER in a wheelchair or stretcher. I think that these hospital claims about emergency care coverage —these are important questions, but we should be asking them across all clinical settings and say what is the appropriate scope of care provided? What is the appropriate level of acuity and ability to provide emergent or critical care? That’s an important question regardless of ownership model across the entire industry.
Deeper Dive Into Data on Physician-Owned Hospitals
Glatter: We need to really focus on that. I’ll agree with you on that.
There was a March 2023 report from Dobson | DaVanzo. It showed that physician-owned hospitals had lower Medicaid, dual-eligible, and uncompensated care and charity care discharges than full-service acute care hospitals. Physician-owned hospitals had less than half the proportion of Medicaid discharges compared with non–physician-owned hospitals. They were also less likely to care for dual-eligible patients overall compared with non–physician-owned hospitals.
In addition, when COVID hit, the physician-owned hospitals overall — and again, there may be exceptions — were not equipped to handle these patient surges in the acute setting of a public health emergency. There was a hospital in Texas that did pivot that I’m aware of — Renaissance Hospital, which ramped up a long-term care facility to become a COVID hospital — but I think that’s the exception. I think this report raises some valid concerns; I’ll let you rebut that.
Miller: A couple of things. One, I am not aware that there’s any clear market evidence or a systematic study that shows that physician-owned hospitals had trouble responding to COVID. I don’t think that assertion has been proven. The study was funded by the hospital industry. First of all, it was not a peer-reviewed study; it was funded by an industry that paid a consulting firm. It doesn’t mean that we still shouldn’t read it, but that brings bias into question. The joke in Washington is, pick your favorite statistician or economist, and they can say what you want and have a battle of economists and statisticians.
For example, in that study, they didn’t include the entire ownership universe of physician-owned hospitals. If we go to the peer-reviewed literature, there’s a great 2015 BMJ paper showing that the Medicaid payer mix is actually the same between physician-owned hospitals vs not. The mix of patients by ethnicity — for example, think about African American patients — was the same. I would be more inclined to believe the peer-reviewed literature in BMJ as opposed to an industry-funded study that was not peer-reviewed and not independent and has methodological questions.
Glatter: Those data are 8 years old, so I’d like to see more recent data. It would be interesting, just as a follow-up to that, to see where the needle has moved — if it has, for that matter — in terms of Medicaid patients that you’re referring to.
Miller: I tend to be skeptical of all industry research, regardless of who published it, because they have an economic incentive. If they’re selecting certain age groups or excluding certain hospitals, that makes you wonder about the validity of the study. Your job as an industry-funded researcher is that, essentially, you’re being paid to look for an answer. It’s not necessarily an honest evaluation of the data.
Glatter: I want to bring up another point about the Hospital Readmissions Reduction Program (HRRP) and the data on how physician-owned hospitals compared with acute care hospitals that are non–physician-owned and have you comment on that. The Dobson | DaVanzo study called into question that physician-owned hospitals treat fewer patients who are dual-eligible, which we know.
Miller: I don’t think we do know that.
Glatter: There are data that point to that, again, looking at the studies.
Miller: I’m saying that’s a single study funded by industry as opposed to an independent, academic, peer-reviewed literature paper. That would be like saying, during the debate of the Inflation Reduction Act (IRA), that you should read the pharmaceutical industries research but take any of it at pure face value as factual. Yes, we should read it. Yes, we should evaluate it on its own merits. I think, again, appropriately, you need to be concerned when people have an economic incentive.
The question about the HRRP I’m going to take a little broader, because I think that program is unfair to the industry overall. There are many factors that drive hospital readmission. Whether Mrs Smith went home and ate potato chips and then took her Lasix, that’s very much outside of the hospital industry’s control, and there’s some evidence that the HRRP increases mortality in some patient populations.
In terms of a quality metric, it’s unfair to the industry. I think we took an operating process, internal metric for the hospital industry, turned it into a quality metric, and attached it to a financial bonus, which is an inappropriate policy decision.
Rethinking Ownership Models and Empowering Clinicians
Glatter: I agree with you on that. One thing I do want to bring up is that whether the physician-owned hospitals are subject to many of the quality measures that full-service, acute care hospitals are. That really is, I think, a broader context.
Miller: Fifty-five percent of physician-owned hospitals are full-service community hospitals, so I would say at least half the market is 100% subject to that.
Glatter: If only 50% are, that’s already an issue.
Miller: Cardiac specialty hospitals — which, as I said, nonprofit and for-profit hospital chains also operate — are also subject to the appropriate quality measures, readmissions, etc. Just because we don’t necessarily have the best quality measurement in the system in the country, it doesn’t mean that we shouldn’t allow care specialization. As I’d point out, if we’re concerned about specialty hospitals, the concern shouldn’t just be about physician-owned specialty hospitals; it should be about specialty hospitals by and large. Many health systems run cardiac specialty hospitals, cancer specialty hospitals, and orthopedic specialty hospitals. If we’re going to have a discussion about concerns there, it should be about the entire industry of specialty hospitals.
I think specialty hospitals serve an important role in society, allowing for specialization and exploiting in a positive way the volume-quality relationship. Whether those are owned by a for-profit publicly traded company, a tax-exempt facility, or physicians, I think that is an important way to have innovation and care delivery because frankly, we haven’t had much innovation in care delivery. Much of what we do in terms of how we practice clinically hasn’t really changed in the 50 years since my late father graduated from medical school. We still have rounds, we’re still taking notes, we’re still operating in the same way. Many processes are manual. We don’t have the mass production and mass customization of care that we need.
When you have a focused factory, it allows you to design care in a way that drives up quality, not just for the average patient but also the patients at the tail ends, because you have time to focus on that specific service line and that specific patient population.
Physician-owned community hospitals offer an important opportunity for a different employment model. I remember going to the dermatologist and the dermatologist was depressed, shuffling around the room, sad, and I asked him why. He said he didn’t really like his employer, and I said, “Why don’t you pick another one?” He’s like, “There are only two large health systems I can work for. They all have the same clinical practice environment and functionally the same value.”
Physicians are increasingly burned out. They face monopsony power in who purchases their labor. They have little control. They don’t want to go through five committees, seven administrators, and attend 25 meetings just to change a single small process in clinical operations. If you’re an owner operator, you have a much better ability to do it.
Frankly, when many facilities do well now, when they do well clinically and do well financially, who benefits? The hospital administration and the hospital executives. The doctors aren’t benefiting. The nurses aren’t benefiting. The CNA is not benefiting. The secretary is not benefiting. The custodian is not benefiting. Shouldn’t the workers have a right to own and operate the business and do well when the business does well serving the community? That puts me in the weird space of agreeing with both conservatives and progressives.
Glatter: I agree with you. I think an ownership stake is always attractive. It helps with retention of employed persons. There’s no question that, when they have a stake, when they have skin in the game, they feel more empowered. I will not argue with you about that.
Miller: We don’t have business models where workers have that option in healthcare. Like the National Academy of Medicine said, one of the key drivers of burnout is the externalization of the locus of control over clinical practice, and the current business operating models guarantee an externalization of the locus of control over clinical practice.
If you actually look at the recent American Medical Association (AMA) meeting, there was a resolution to ban the corporate practice of medicine. They wanted to go more toward the legal professions model where only physicians can own and operate care delivery.
Miller: It’s not just doctors. I think nurses want a better lifestyle. The nurses are treated as interchangeable lines on a spreadsheet. The nurses are an integral part of our clinical team. Why don’t we work together as a clinical unit to build a better delivery system? What better way to do that than to have clinicians in charge of it, right?
My favorite bakery that’s about 30 minutes away is owned by a baker. It is not owned by a large tax-exempt corporation. It’s owned by an owner operator who takes pride in their work. I think that is something that the profession would do well to return to. When I was a resident, one of my colleagues was already planning their retirement. That’s how depressed they were.
I went into medicine to actually care for patients. I think that we can make the world a better place for our patients. What that means is not only treating them with drugs and devices, but also creating a delivery system where they don’t have to wander from lobby to lobby in a 200,000 square-foot facility, wait in line for hours on end, get bills 6 months later, and fill out endless paper forms over and over again.
All of these basic processes in healthcare delivery that are broken could have and should have been fixed — and have been fixed in almost every other industry. I had to replace one of my car tires because I had a flat tire. The local tire shop has an app, and it sends me SMS text messages telling me when my appointment is and when my car is ready. We have solved all of these problems in many other businesses.
We have not solved them in healthcare delivery because, one, we have massive monopolies that are raising prices, have lower quality, and deliver a crappy patient experience, and we have also subjugated the clinical worker into a corporate automaton. We are functionally drones. We don’t have the agency and the authority to improve clinical operations anymore. It’s really depressing, and we should have that option again.
I trust my doctor. I trust the nurses that I work with, and I would like them to help make clinical decisions in a financially responsible and a sensible operational manner. We need to empower our workforce in order to do that so we can recapture the value of what it means to be a clinician again.
The current model of corporate employment: massive scale, more administrators, more processes, more emails, more meetings, more PowerPoint decks, more federal subsidies. The hospital industry has choices. It can improve clinical operations. It can show up in Washington and lobby for increased subsidies. It can invest in the market and not pay taxes for the tax-exempt facilities. Obviously, it makes the logical choices as an economic actor to show up, lobby for increased subsidies, and then also invest in the stock market.
Improving clinical operations is hard. It hasn’t happened. The Bureau of Labor Statistics shows that the private community hospital industry has had flat labor productivity growth, on average, for the past 25 years, and for some years it even declined. This is totally atypical across the economy.
We have failed our clinicians, and most importantly, we have failed our patients. I’ve been sick. My relatives have been sick, waiting hours, not able to get appointments, and redoing forms. It’s a total disaster. It’s time and reasonable to try an alternative ownership and operating model. There are obviously problems. The problems can and should be addressed, but it doesn’t mean that we should have a statutory prohibition on professionals owning and operating their own business.
Glatter: There was a report that $500 million was saved by limiting or banning or putting a moratorium on physician-owned hospitals by the Congressional Budget Office.
The CBO is not transparent about what its assumptions are or its analysis and methods. As a researcher, we have to publish our information. It has to go through peer review. I want to know what goes into that $500 million figure — what the assumptions are and what the model is. It’s hard to comment without knowing how they came up with it.
Glatter: The points you make are very valid. Physicians and nurses want a better lifestyle.
Miller: It’s not even a better lifestyle. It’s about having a say in how clinical operations work and helping make them better. We want the delivery system to work better. This is an opportunity for us to do so.
Glatter: That translates into technology: obviously, generative artificial intelligence (AI) coming into the forefront, as we know, and changing care delivery models as you’re referring to, which is going to happen. It’s going to be a slow process. I think that the evolution is happening and will happen, as you accurately described.
Miller: The other thing that’s different now vs 20 years ago is that managed care is here, there, and everywhere, as Dr Seuss would say. You have utilization review and prior authorization, which I’ve experienced as a patient and a physician, and boy, is it not a fun process. There’s a large amount of friction that needs to be improved. If we’re worried about induced demand or inappropriate utilization, we have managed care right there to help police bad behavior.
Reforming Healthcare Systems and Restoring Patient-Centric Focus
Glatter: If you were to come up with, say, three bullet points of how we can work our way out of this current morass of where our healthcare systems exist, where do you see the solutions or how can we make and effect change?
Miller: I’d say there are a couple of things. One is, let business models compete fairly on an equal playing field. Let the physician-owned hospital compete with the tax-exempt hospital and the nonprofit hospital. Put them on an equal playing field. We have things like 340B, which favors tax-exempt hospitals. For-profit or tax-paying hospitals are not able to participate in that. That doesn’t make any sense just from a public policy perspective. Tax-paying hospitals and physician-owned hospitals pay taxes on investments, but tax-exempt hospitals don’t. I think, in public policy, we need to equalize the playing field between business models. Let the best business model win.
The other thing we need to do is to encourage the adoption of technology. The physician will eventually be an arbiter of tech-driven or AI-driven tools. In fact, at some point, the standard of care might be to use those tools. Not using those tools would be seen as negligence. If you think about placing a jugular or central venous catheter, to not use ultrasound would be considered insane. Thirty years ago, to use ultrasound would be considered novel. I think technology and AI will get us to that point of helping make care more efficient and more customized.
Those are the two biggest interventions, I would say. Third, every time we have a conversation in public policy, we need to remember what it is to be a patient. The decision should be driven not around any one industry’s profitability, but what it is to be a patient and how we can make that experience less burdensome, less expensive, or in plain English, suck less.
Glatter: Safety net hospitals and critical access hospitals are part of this discussion that, yes, we want everything to, in an ideal world, function more efficiently and effectively, with less cost and less red tape. The safety net of our nation is struggling.
Miller: I 100% agree. The Cook County hospitals of the world are deserving of our support and, frankly, our gratitude. Facilities like that have huge burdens of patients with Medicaid. We also still have millions of uninsured patients. The neighborhoods that they serve are also poorer. I think facilities like that are deserving of public support.
I also think we need to clearly define what those hospitals are. One of the challenges I’ve realized as I waded into this space is that market definitions of what a service market is for a hospital, its specialty type or what a safety net hospital is need to be more clearly defined because those facilities 100% are deserving of our support. We just need to be clear about what they are.
Regarding critical access hospitals, when you practice in a rural area, you have to think differently about care delivery. I’d say many of the rural systems are highly creative in how they structure clinical operations. Before the public health emergency, during the COVID pandemic, when we had a massive change in telehealth, rural hospitals were using — within the very narrow confines — as much telehealth as they could and should.
Rural hospitals also make greater use of nurse practitioners (NPs) and physician assistants (PAs). For many of the specialty services, I remember, your first call was an NP or a PA because the physician was downstairs doing procedures. They’d come up and assess the patient before the procedure, but most of your consult questions were answered by the NP or PA. I’m not saying that’s the model we should use nationwide, but that rural systems are highly innovative and creative; they’re deserving of our time, attention, and support, and frankly, we can learn from them.
Glatter: I want to thank you for your time and your expertise in this area. We’ll see how the congressional hearings affect the industry as a whole, how the needle moves, and whether the ban or moratorium on physician-owned hospitals continues to exist going forward.
Miller: I appreciate you having me. The hospital industry is one of the most important industries for health care. This is a time of inflection, right? We need to go back to the value of what it means to be a clinician and serve patients. Hospitals need to reorient themselves around that core concern. How do we help support clinicians — doctors, nurses, pharmacists, whomever it is — in serving patients? Hospitals have become too corporate, so I think that this is an expected pushback.
Glatter: Again, I want to thank you for your time. This was a very important discussion. Thank you for your expertise.
Robert D. Glatter, MD, is an assistant professor of emergency medicine at Zucker School of Medicine at Hofstra/Northwell in Hempstead, New York. He is a medical advisor for Medscape and hosts the Hot Topics in EM series.
Brian J. Miller, MD, MBA, MPH, is a hospitalist and an assistant professor of medicine at the Johns Hopkins University School of Medicine. He is also a nonresident fellow at the American Enterprise Institute. From 2014 – 2017, Dr Miller worked at four federal regulatory agencies: Federal Trade Commission (FTC), Federal Communications Commission (FCC), Centers for Medicare & Medicaid Services (CMS), and the Food & Drug Administration (FDA).
In much of the country, a single hospital system now accounts for most hospital admissions.
Some illnesses and injuries — say, a broken ankle — can send you to numerous health care providers. You might start at urgent care but end up in the emergency room. Referred to an orthopedist, you might eventually land in an outpatient surgery center.
Four different stops on your road to recovery. But as supersized health care systems gobble up smaller hospitals and clinics, it’s increasingly likely that all those facilities will be owned by the same corporation.
Hospital trade groups say mergers can save failing hospitals, especially rural ones. But research shows that a lack of competition often leads to fewer services at higher costs. In recent years, federal regulators have been taking a harder look at health care consolidation.
Yet some states, notably those in the South, are paving the way for more mergers.
Mississippi passed a law this year that exempts hospital acquisitions from state antitrust laws, while North Carolina considered legislation to do the same for the University of North Carolina’s health system. Louisiana officials approved a $150 million hospital acquisition late last year that has ignited a legal battle with the Federal Trade Commission over whether they allowed a monopoly.
States including South Carolina, Tennessee, Texas and Virginia have certificate of public advantage (COPA) laws that let state agencies determine whether hospitals can merge, circumventing federal antitrust laws. And large hospital systems wield significant political power in many state capitals.
‘A tool in the tool belt’
Nearly half of Mississippi’s rural hospitals are at risk of closing, according to a report from the Center for Healthcare Quality & Payment Reform, a nonprofit policy research center.
Mississippi leaders hope easing restrictions on hospital mergers could be a solution. A new law exempts all hospital acquisitions and mergers from state antitrust laws and classifies community hospitals as government entities, making them immune from antitrust enforcement.
We saw primary care offices get shut down. We’ve seen our specialists leave for out of state. Several of the outlying hospitals saw services cut even though they were told it wouldn’t happen.
– Kerri Wilson, a registered nurse in North Carolina
Mississippi, one of the poorest states in the nation, is also one of the least healthy, with high rates of chronic conditions like heart disease and diabetes. It is one of 10 states that haven’t expanded Medicaid under the Affordable Care Act, and has one of the nation’s highest percentages of people without health insurance.
“Like many states in a similar socioeconomic status, Mississippi has difficulties with patients that are either not insured or underinsured,” said Ryan Kelly, executive director of the nonprofit Mississippi Rural Health Association. Food insecurity and lack of reliable transportation mean rural residents tend to be sicker and more expensive to treat.
That’s part of the reason why so many Mississippi hospitals operate in the red. The largest hospital in the Mississippi Delta region, Greenwood Leflore, is at immediate risk of closure even after hospital leaders shuttered unit after unit — including labor and delivery, and intensive care — in an effort to remain solvent.
A deal for the University of Mississippi Medical Center to purchase Greenwood Leflore fell through last year. Now, with the new law in effect, the hospital’s owners — the city and county — are soliciting new bidders and offering them the option to buy the hospital outright.
Kelly said he expects to see more Mississippi hospitals consolidate over the coming decade. Some have already had conversations around merger possibilities after the new law went into effect, though talks are in early days.
“It’s a tool in the tool belt,” he said of the new law. “I think it could be a saving grace for some of our hospitals that are perennially struggling but still serve with good purpose. They could be part of a larger system that could help offset their costs so they’re able to be a little leaner but still provide services in their community.”
Leaders in some states think consolidation could solve their health care woes, but studies indicate it has a negative impact.
“There’s a large body of research showing that health care consolidation leads to increases in prices without clear evidence it improves quality,” said Zachary Levinson, a project director at KFF, a nonprofit health care policy research organization, who analyzes the business practices of hospitals and other providers and their impact on costs.
When researchers studied how affiliation with a larger health system affected the number of services a rural hospital offered, they found most of the losses in service occurred in hospitals that joined larger systems, according to a 2023 study from the Rural Policy Research Institute at the University of Iowa.
Even when an acquisition by a larger health system helps a struggling hospital keep its doors open, “there can be potential tradeoffs,” Levinson said.
“There’s some concern that, for example, when a larger health system buys up a smaller independent hospital in a different region, that hospital will become less attentive to the specific needs of the community it serves,” and may cut services the community wants because they’re not deemed profitable enough, he said.
Most research suggests hospital consolidation does lead to higher prices, according to a sweeping 2020 report from MedPAC, an independent congressional agency that advises Congress on issues affecting Medicare. The report found that patients with private insurance pay higher prices for care and for insurance in markets that are dominated by one health care system. And when hospitals acquire physician practices, taxpayer and patient costs can double for some services provided in a physician’s office, the report found.
Kelly said he’s not as concerned with consolidation raising costs for Mississippi’s rural residents because so many qualify for subsidized care, but he does think mergers could eliminate some jobs in the health care sector.
“It’s hard to say for sure,” he said. “It is a risk, no question. But I still think it’s a net positive.”
A ‘hospital cartel’
When HCA Healthcare purchased a North Carolina hospital system in 2019, registered nurse Kerri Wilson wasn’t prepared for how much would change — and how quickly — at her hospital in Asheville.
“Once the sale was final in 2019, that’s when it was like the ball dropped and we started seeing staffing cuts,” said Wilson, an Asheville native who has worked in the cardiology stepdown unit at Mission Hospital since 2016.
“We saw our nurse-patient ratios change,” Wilson said. “We saw primary care offices get shut down. We’ve seen our specialists leave for out of state. Several of the outlying hospitals saw services cut even though they were told it wouldn’t happen.”
In the four years since HCA Healthcare bought Mission Health, North Carolinians have hit the nation’s largest health system with multiple antitrust lawsuits, including one that asserts HCA operates an unlawful health care monopoly through Mission Health, and another filed by city and county governments that says HCA’s corporate practices have decimated local health care options and raised costs.
HCA Healthcare did not immediately respond to a request for comment. However, when the second lawsuit was filed, HCA/Mission Health spokesperson Nancy Lindell called it “meritless.”
“Mission Health has been caring for Western North Carolina for more than 130 years and our dedication to providing excellent health care to our community will not waiver [sic] as we vigorously defend against this meritless litigation,” Lindell said in a statement to the Mountain Xpress newspaper. “We are disappointed in this action and we continue to be proud of the heroic work our team does daily.”
Mission’s nurses voted in 2020 to join National Nurses Organizing Committee, an affiliate of National Nurses United, the nation’s largest nursing union, to advocate for higher pay and safer working conditions.
Meanwhile, North Carolina leaders such as Republican State Treasurer Dale Folwell and Democratic Attorney General Josh Stein have spoken out against HCA’s practices. Folwell likened the merger to a “hospital cartel” and both officials filed amicus briefs supporting the plaintiffs in the antitrust lawsuits.
“We have a situation with the cartel-ization of health care in North Carolina where people have to drive miles just to get basic services, and this is unacceptable,” Folwell told Stateline. He said many North Carolinians, particularly those with low incomes, fear seeking medical help because of sky-high medical bills that he said are a result of massive health care systems with little state oversight.
Folwell has publicly criticized the power that the North Carolina Health Care Association, the state’s hospital trade group, wields in the legislature. He calls the group the “leader of the [hospital] cartel.”
Industry groups spent more than $141 million nationwide lobbying state officials on health issues in 2021. And out of that $141 million, the hospital and nursing home industry spent the most, accounting for nearly 1 out of every 4 dollars spent on lobbying state lawmakers over health issues.
“This is not a Republican or Democrat issue,” said Folwell, who has lent his support to a bipartisan bill that would limit the power of large hospitals to charge interest rates and rein in medical debt collection tactics. “It’s a moral issue.”
North Carolina Democratic state Sen. Julie Mayfield, who was on the Asheville City Council when HCA acquired Mission Health, sponsored a bill earlier this year that would have curbed hospital consolidations.
In a social media post introducing the bill, Mayfield said she hoped it would “prevent other communities from suffering what we have suffered in the wake of the Mission sale — loss of nursing and other staff, loss of physicians, closure of facilities, and the resulting lower quality of care many people have experienced in Mission hospitals over the last four years.”
Even the Federal Trade Commission jumped in, urging legislators to “reconsider” a bill that would have greenlighted UNC Health’s expansion, saying it could “lead to patient harm in the form of higher health care costs, lower quality, reduced innovation and reduced access to care.” That bill ultimately failed in the state House, as sentiment among some North Carolina leaders had already soured on hospital mergers.
In most U.S. markets, a single hospital system now accounts for more than half of hospital inpatient admissions. Federal regulators have been scrutinizing health care mergers more carefully in recent years, said KFF’s Levinson. The FTC has both sued and been sued by health care systems in Louisiana this year, and recently released a draft version of new guidelines on anti-competitive practices.
“People have viewed those guidelines as indicating the FTC and [the U.S. Department of Justice] will be more interested in aggressively challenging anti-competitive practices than in the past,” Levinson said.
Both the Trump and Biden administrations issued executive orders directing federal agencies to focus on promoting competition in health care markets. President Joe Biden’s order noted that “hospital consolidation has left many areas, particularly rural communities, with inadequate or more expensive healthcare options.”
In Mississippi, the hospital mergers law received widespread support from most of the state’s GOP leaders. But the state’s far-right Freedom Caucus came out against it, with Republican state Rep. Dana Criswell, the chair of the caucus, calling it “an attempt at a complete government takeover” of Mississippi’s hospitals.
Criswell said allowing the University of Mississippi Medical Center to buy smaller hospitals “will create a huge government protected monopoly, driving out competition and ultimately putting private hospitals out of business.”
‘Trying something different’
Wilson, the Asheville nurse, said she used to have three or four patients per shift before the merger; now she typically has five. That gives her an average of 10 minutes per patient per hour. It’s not enough time, she said, to give patients their medication, answer questions and perform other tasks that she said nurses often take on because other departments are short-staffed.
Sometimes, she said, those tasks include helping patients go to the bathroom because there aren’t enough nursing assistants or taking out the trash because of a shortage of cleaning staff. Meanwhile, the waiting rooms are overflowing.
Wilson joined the new Mission Hospital nurses union, which was able to negotiate raises for its members. The union continues to protest working conditions, including staff-patient ratios.
But Kelly, of the Mississippi Rural Health Association, said that in his state, mergers are an opportunity for positive change.
“It’s not like health care in Mississippi is at the top of the list for good things,” he said. “I think this is an example of trying something different and seeing if it works.”
Last week, six notable associations representing health insurers and large employers announced Better Solutions for Healthcare (BSH):“An advocacy organization dedicated to bringing together employers, consumers, and taxpayers to educate lawmakers on the rising cost of healthcare and provide ideas on how we can work together to find better solutions that lower healthcare costs for ALL Americans.”
BSH, which represents 492 large employers, 34 Blue Cross plans, 139 insurers and 42 business coalitions, blames hospitals asserting that “over the last ten years alone, the cost of providing employee coverage has increased 47% with hospitals serving as the number one driver of healthcare costs.”
Its members, AHIP, the Blue Cross Blue Shield Association, the Business Group on Health, Public Sector Health Care Roundtable, National Alliance of Healthcare Purchaser Coalitions and the American Benefits Council, pledge to…
Promote hospital competition
Enforce Federal Price Transparency Laws for Hospital Charges
Rein in Hospital Price Mark-ups
Insure Honest Billing Practices
And, of particular significance, BSH calls out “the growing practice of corporate hospitals establishing local monopolies and leveraging their market dominance to charge patients more…With hospital consolidation driving down competition, there’s no pressure for hospitals to bring costs back within reach for employees, retirees and their families…prices at monopoly hospitals are 12% higher than in markets with four or more competitors.”
The BSH leadership team is led by DC-based healthcare policy veterans with notable lobbying chops: Adam “Buck” Buckalew, a former Sen. Lamar Alexander (R-TN) staffer who worked on the Health Education, Labor and Pensions (HELP) committee and is credited with successfully spearheading the No Surprises Act legislation that took effect in January 2022, and Kathryn Spangler, another former HELP staffer under former Sen. Mike Enzi (R-WY) who most recently served as Senior Policy Advisor at the American Benefits Council.
It’s a line in the sand for hospitals, especially large not-for-profit systems that are on the defensive due to mounting criticism.
Examples from last week: Atrium and Caremont were singled in NC by the state Treasurer for their debt collection practices based on a Duke study that got wide media coverage. Allina’s dispute with 550 of its primary care providers seeking union representation based on their concerns about patient safety. Jefferson Health was called out for missteps under its prior administration’s “growth at all costs” agenda and the $35 million 2021 compensation for Common Spirit’s CEO received notice in industry coverage.
My take:
BSH represents an important alignment of health insurers with large employers who have shouldered a disproportionate share of health costs for years through the prices imposed for the hospitals, prescriptions and services their employees and dependents use.
Though it’s too early to predict how BSH vs. Corporate Hospitals will play out, especially in a divided Congress and with 2024 elections in 14 months, it’s important to inject a fair and balanced context for this contest as the article of war are unsealed:
Health insurers and hospitals share the blame for high health costs along with prescription drug manufacturers and others. The U.S. system feasts on opaque pricing, regulated monopolies and supply-induced demand. Studies show unit costs for hospitals along with prescription drug costs bear primary responsibility for two-thirds of health cost increases in recent years—the result of increased demand and medical inflation. But insurers are complicit: benefits design strategies that pre-empt preventive health and add administrative costs are parts of the problem.
Corporatization of the U.S. system cuts across every sector: Healthcare’s version of Moneyball is decidedly tilted toward bigger is better: in healthcare, that’s no exception. 3 of the top 10 in the Fortune 100 are healthcare (CVS-Aetna, United, McKesson)) and HCA (#66) is the only provider on the list. The U.S. healthcare industry is the largest private employer in the U.S. economy: how BSH addresses healthcare’s biggest employers which include its hospitals will be worth watching. And Big Pharma companies pose an immediate challenge: just last week, HHS called out the U.S. Chamber of Commerce for siding with Big Pharma against implementation of drug price controls in the Inflation Reduction Act—popular with voters but not so much in Big Pharma Board rooms.
The focus will be on Federal health policies. BSH represents insurers and employers that operate across state lines–so do the majority of major health systems. Thus, federal rules, regulations, administrative actions, executive orders, and court decisions will be center-stage in the BSH v. corporate hospitals war. Revised national policies around Medicare and federal programs including military and Veterans’ health, pricing, equitable access, affordability, consolidation, monopolies, data ownership, ERISA and tax exemptions, patent protections and more might emerge from the conflict. As consolidation gets attention, the differing definitions of “markets” will require attention: technology has enabled insurers and providers to operate outside traditional geographic constraints, so what’s next? And, complicating matters, federalization of healthcare will immediately impact states as referenda tackle price controls, drug pricing, Medicaid coverage and abortion rights—hot buttons for voters and state officials.
Boards of directors in each healthcare organization will be exposed to greater scrutiny for their actions: CEO compensation, growth strategies, M&A deals, member/enrollee/patient experience oversight, culture and more are under the direct oversight of Boards but most deflect accountability for major decisions that pose harm. Balancing shareholder interests against the greater good is no small feat, especially in a private health system which depends on private capital for its innovations.
8.6% of the U.S. population is uninsured, 41% of Americans have outstanding medical debt, and the majority believe health costs are excessive and the U.S. system is heading in the wrong direction.
Compared to other modern systems in the world, ours is the most expensive for its health services, least invested in social determinants that directly impact 70% of its costs and worst for the % of our population that recently skipped needed medical care (39.0% (vs. next closest Australia 21.2%), skipped dental care (36.2% vs. next closest Australia 31.7%) and had serious problems/ were unable to pay medical bills (22.4% next closest France 10.1%). Thus, it’s a system in which costs, prices and affordability appear afterthoughts.
Who will win BSH vs. Corporate Hospitals? It might appear a winner-take all showdown between lobbyists for BSH and hospital hired guns but that’s shortsighted. Both will pull out the stops to win favor with elected officials but both face growing pushback in Congress and state legislatures where “corporatization” seems more about a blame game than long-term solution.
Each side will use heavy artillery to advance their positions discredit the other. And unless the special interests that bolster efforts by payers are hospitals are subordinated to the needs of the population and greater good, it’s not the war to end all healthcare wars. That war is on the horizon.
Last Thursday, the Senate Finance Committee heard testimony from experts who offered damning testimony about hospital consolidation (excerpts below). Committee Chair Ron Wyden (D-OR) gaveled the session to order with this commentary:
“I’d like to talk about health care costs and quality. Advocates for proposed mergers often say they will bring lower health costs due to increased efficiency. Time after time, it’s simply not proven to be the case. When hospitals merge, prices go up, not down. When insurers merge, premiums go up, not down. And quality of care is not any better with this higher cost. “
Ranking Member Mike Crapo (R-ID) offered a more conciliatory assessment in his opening statement: “In exploring and addressing these problems, we have the opportunity to build on our efforts to improve medication access and affordability by taking a broader look at the health care system through a similarly bipartisan, consensus-based lens…We need to examine the drivers of consolidation, as well as its effects on care quality and costs, both for patients and taxpayers. We also need to develop focused, bipartisan and bicameral solutions that reduce out-of-pocket spending while protecting access to lifesaving services.”
Congress’ concern about consolidation in healthcare is broad-based. Pharmacy benefits managers and health insurers face similar scrutiny. Drug price control referenda have passed in several states and a federal cap was included in the Inflation Reduction Act.
The reality is this: the entire U.S. health system is on trial in the court of public opinion for ‘careless disregard for affordability’. And hospitals are seen as part of the problem justifying consolidation as a defense mechanism.
What followed in this 3-hour hearing was testimony from 3 experts critical of hospital consolidation, a Colorado community hospital CEO who opined to competition with big hospital systems and a Peterson Foundation spokesperson who offered that data access and transparency are necessary to mitigate consolidation’s downside impact.
None of their testimony was surprising. Nor were questions from the 25 members of the committee. It’s a narrative that played out in House Energy and Commerce and Ways and Means Committee hearings last month. It’s likely to continue.
Often, Congressional Hearings on healthcare issues amount to little more than political theatre. In this one, four key themes emerged:
Consolidation among hospitals has adversely impacted quality of care and affordability of healthcare. Prices have gone up without commensurate improvements in quality harming consumers.
Larger organizations use horizontal and vertical integration to strengthen their positions relative to smaller competitors. Physician employment by hospitals is concerning. Rural and safety net hospitals are impaired most.
Anti-trust efforts, price transparency mandates, data sharing and value-based programs have not been as effective as anticipated.
Physicians are victims of consolidation and corporatization in U.S. healthcare. They’re paid less because others are paid more.
While committee members varied widely in the intensity of their animosity toward hospitals, a consensus emerged that the hospital status quo is not working for voters and consumers.
My take:
Consolidation is part of everyday life. Last Tuesday’s bombshell announcement of the merger of the PGA Tour and the Saudi Arabia’s Public Investment Fund caught the golfing world by surprise. Anti-trust issues and monopolistic behaviors are noticed by voters and lawmakers. Hospital consolidation is no exception festering suspicions among lawmakers and voters that the public’s good is ill-served. And studies showing that charity care among not-for-profit hospitals is lower than for-profit confuse and complicate.
As I listened to the hearing, I had questions…
Were all relevant perspectives presented?
Was the information provided by witnesses and cited in Committee member questioning accurate?
Will meaningful action result?
But having testified before Congressional Committees, I find myself dismissive of most hearings which seem heavy on political staging but light on meaningful insight. Many are little more than political theatre. Hospital consolidation seems different. There seems to be growing consensus that it’s harmful to some and costly to all.
Sadly, this hearing is the latest evidence that the good will built by hospital heroics in the pandemic is now forgotten. It’s clear hospital consolidation is an issue that faces strong and increased headwinds with evidence mounting—accurate or not– showing more harm than good.
Pennsylvania unions have filed a complaint with the Department of Justice alleging integrated hospital giant UPMC is abusing its dominant market position to suppress wages and retain workers.
On Thursday, SEIU Healthcare Pennsylvania and a coalition of labor unions filed a 55-page complaint against UPMC, the largest private employer in the state, saying the hospital system’s size has allowed it to stamp out wage growth, “drastically increase” workload and keep workers from departing to other jobs.
The unions are asking federal regulators to investigate UPMC for antitrust violations, citing its dominance of the healthcare market in select regions of Pennsylvania. UPMC denied allegations of wage suppression.
Dive Insight:
The Pittsburgh-based system has seen a rise in labor complaints, according to the unions, as the system has grown into its 41-hospital footprint through a series of mergers and acquisitions. UPMC, which also operates 800 doctors offices and clinics and a handful of health insurance offerings, reported $26 billion in operating revenue last year.
Attempts in the last decade to organize UPMC’s hourly workers have been unsuccessful, according to SEIU.
Matt Yarnell, president of SEIU Healthcare Pennsylvania, called the complaints groundbreaking on a Thursday call with reporters, saying that no entity has ever filed a complaint arguing that mobility restrictions and labor violations are anticompetitive, and in violation of antitrust law.
The complaint alleges that, for every 10% increase in market share, the wages of UPMC workers falls 30 to 57 cents an hour on average. UPMC hospital workers face an average 2% wage gap compared to non-UPMC facilities, according to a study cited in the complaint.
In addition, the labor groups allege that UPMC’s staffing ratios have fallen over the past decade, resulting in its staffing ratios being 19% lower on average compared with non-UPMC care sites as of 2020.
The unions are going after UPMC for being a “monopsony,” or a company that controls buying in a given marketplace, including controlling a large number of jobs. UPMC has some 92,000 workers, according to the complaint, and has cut off avenues of competition through non-compete agreements, in addition to preventing employees from unionizing.
“If, as we believe, UPMC is insulated from competitive market pressures, it will be able to keep workers’ wages and benefits — and patient quality — below competitive levels, while at the same time continually imposing further restraints and abuses on workers to maintain its market dominance,” the complaint states. “Because we believe this conduct is contrary to Section 2 of the Sherman Act, we respectfully urge the Department of Justice to investigate UPMC and take action to halt this conduct.”
In response to the allegations, UPMC said it has the highest entry-level pay of any provider in the state, and offers “above-industry” employee benefits. UPMC’s average wage is more than $78,000, Paul Wood, UPMC’s chief communications officer, told Healthcare Dive in a statement.
“There are no other employers of size and scope in the regions UPMC serves that provide good paying jobs at every level and an average wage of this magnitude,” Wood said.
Healthcare workers are increasingly pushing for better working conditions and pay amid the COVID-19 pandemic, as hospitals grapple with recruitment and retention issues driven by burnout and heightened labor costs.
HENRY KOTULA 