House Subcommittee Takes Dim View of Healthcare Consolidation

Lawmakers and witnesses alike cited the ill-effects of hospital mergers and acquisitions in a long list of industry behavior they find troubling.


An economics and health policy professor from Carnegie Mellon suggested lawmakers should give the FTC more power to review nonprofit mergers.

Lawmakers from both sides of the aisle expressed dissatisfaction with the healthcare industry’s consolidation trend and voiced support for legislative action.

A hearing of the House Judiciary Committee’s antitrust subcommittee would not have been a comfortable place Thursday for any healthcare executive touting the benefits of a planned merger or acquisition.

Lawmakers and witnesses took turns criticizing rampant consolidation among hospitals and other healthcare companies. While the public is often told these deals will lead to improved efficiency and higher quality care, those purported benefits frequently fail to materialize, they said.

Since the hearing grouped payer and provider consolidation with anticompetitive concerns about the pharmaceutical industry—an area that both major parties have expressed interest in addressing through congressional action—the discussion could signal how lawmakers will approach any legislation to address the problems they perceive.

Rep. Doug Collins, a Republican from Georgia and the committee’s ranking member, said hospital consolidation has had an especially detrimental impact on rural communities in his state.

“These communities often already have few options for quality care, so as hospital consolidation has increased over the past 10 years, rural communities like my own have been hurt the most,” Collins said.

“At times, these mergers and acquisitions can help rural communities by keeping facilities open, but often they result in full or partial closures and shifting patients from nearby facilities to those hours away,” he added.

Some problems caused by consolidation, such as increased travel times for emergency services, can “literally mean the difference in life and death,” Collins said.

Jerry Nadler, a Democrat from New York and the committee’s chairman, said there’s no question that the recent spate of mergers has contributed to the industry’s problems.

“It is well documented that hospital mergers can lead to higher prices and lower quality of care,” Nadler said.

Martin Gaynor, PhD, an economics and health policy professor at Carnegie Mellon University and a founder of the Health Care Cost Institute, said in his testimony that there have been nearly 1,600 hospital mergers in the past 20 years, leading most regions to be dominated by one large health system apiece.

“This massive consolidation in healthcare has not delivered for Americans. It has not given us better care or enhanced efficiency,” Gaynor said. “On the contrary, extensive research evidence shows us that consolidation between close competitors results in higher prices, and patient quality of care suffers for lack of competition.”

Since hospitals that have fewer competitors can better negotiate favorable payment terms, this consolidated landscape “poses a serious challenge for payment reform,” he added.

“Our healthcare system is based on markets. That system is only going to work as well as the markets that underpin it,” Gaynor said. “Unfortunately, these markets do not function as well as they could or should.”

Gaynor recommended several possible policy changes, including an end to policies that make it harder for new competitors to enter a market and compete and an expanded authority for the Federal Trade Commission to review potentially anticompetitive conduct by nonprofit entities. He also said lawmakers should consider imposing FTC reporting requirements for even small transactions to enhance the tracking capabilities of enforcement agencies.

To support his claims, in his written testimony, Gaynor pointed to research he completed with Farzad Mostashari of Aledade Inc. and Paul B. Ginsburg of The Brookings Institution.





Lifting the Veil of Secrecy in Health Care Prices

Lifting the Veil of Secrecy in Health Care Prices

Benjamin Franklin's portrair on a one hundred dollar bill peeks out from underneath a puzzle

Stories that caught our attention this week

The late, great Princeton economist Uwe Reinhardt once said that the system for determining prices in the US health care system was “chaos behind a veil of secrecy.” That was in 2006, and clearly, the chaos persists today: In San Francisco, the price for a basic blood test ranges from $80 to $564; in Los Angeles, $12 to $413; and in Portland, $15 to $44.

Why does the price of one of the most common tests in medicine vary so much? Multiple factors like the bargaining power of insurers, provider consolidation, and underlying economic conditions Essential Coverage may explain some of the differences, but the veil shrouding these striking price discrepancies has yet to be completely lifted.

Margot Sanger-Katz writes in the New York Times that health care prices are still hard to uncover because hospitals and insurers set them behind closed doors, and some claim those prices are legally protected trade secrets. She looked at a new analysis by the Health Care Cost Institute (HCCI) that found “enormous swings in price for identical services are common in health care.” To compile the pricing data, HCCI had to pool de-identified health insurance claims submitted to three large insurance companies. “Even the institute can’t say which insurers and providers are attached to the different prices, and it has eliminated certain markets with less competition where it might be easy to guess,” Sanger-Katz writes.

Price transparency is slowly becoming more prevalent. A few online tools exist that allow the public to estimate the price of some medical procedures. The FAIR Health consumer tool has a five-step process for looking up in-network and out-of-network prices for procedures based on a patient’s location. Healthcare Bluebook has a consumer search tool for price information. And HCCI runs, a national and regional-level tool that provides average prices for bundles of health care services.

Government Efforts to Make Prices More Transparent

Federal and state policies are starting to complement these efforts. On January 1, 2019, a new national health care transparency policy took effect. The federal government now requires hospitals to post their price lists, called chargemasters, online in a format that can be easily processed by a computer. Critics of the regulation say that chargemasters are virtually incomprehensible to patients, and Vox journalist Sarah Kliff points out that they only lay out the list prices that hospitals charge for services, not the negotiated prices that insurers actually pay. However, the policy still takes the health care system one step closer to being transparent about costs.

In California, work continues on the creation of a new statewide Healthcare Payments Database. Once completed, the database could provide policymakers, patients, and the public with greater insight into the prices charged for medical services. A review committee comprised of health care stakeholders and experts is advising California’s Office of Statewide Health Planning and Development (OSHPD) about the creation, implementation, and administration of the database. The office has until July 1, 2020, to deliver its recommendations to the legislature.

Several other state-level efforts to increase price transparency have been proposed or remain pending in the current legislative session. Assembly member Al Muratsuchi (D-Torrance) authored AB 1038, a recently stalled measure that would have required California physicians to provide OSHPD with information on the rates they charge the public as well as the different rates they negotiate with health plans for the same services. OSHPD would be required to aggregate the negotiated prices compared to Medicare rates by geographic region. State Senator Richard Pan (D-Sacramento) introduced SB 343, which would update current transparency and disclosure requirements for the health care industry to include data from Kaiser Permanente.

The Prices Are the Problem

Despite the fact that Americans do not use health care services at a greater rate than their counterparts in other advanced nations, such as the United Kingdom, Canada, and Australia, the US spends much more on health care than those countries. Researchers from Harvard University and the London School of Economics published a study in JAMA showing that “prices of labor and goods, including pharmaceuticals, and administrative costs appeared to be the major drivers of the difference in overall cost between the US and other high-income countries.”

In other words, health insurance premiums and out-of-pocket costs are high not because Americans are sicker or go to the hospital too much, but because of soaring individual prices for services.

At a time when Californians are more worried about paying for medical bills than housing, policymakers and patient advocates will need to continue pulling back the veil of secrecy that obscures the true causes of inordinately expensive care.




Study: Americans using less health care, but paying more for it

Study: Americans using less health care, but paying more for it


Health-care spending has increased because prices are rising, not because Americans are using more health care, according to a new study released Tuesday.

The report from the Health Care Cost Institute (HCCI) showed that total health-care spending grew by 4.6 percent per person from 2015 to 2016 even as utilization of services remained steady, or declined in some cases.

As a result, health-care spending per person reached a new high of $5,407 in 2016.

“It is time to have a national conversation on the role of price increases in the growth of health care spending,” said Niall Brennan, president of the HCCI.

“Despite the progress made in recent years on value-based care, the reality is that working Americans are using less care but paying more for it every year. Rising prices, especially for prescription drugs, surgery, and emergency department visits, have been primary drivers of faster growth in recent years.”

The study focused on people under the age of 65 with employer-sponsored health insurance.

Spending on brand named prescription drugs grew by 110 percent between 2012 and 2016, but utilization dropped 38 percent.

According to the report, the average price for an emergency room visit went up 31.5 percent between 2012 and 2016, but the number of visits only increased slightly.

The average price for surgical admissions increased by 30 percent between that five-year period, but there was a 16 percent drop in utilization.