Experts outline framework to address health care consolidations

Joanne Kenen

About Joanne Kenen

Joanne Kenen, (@JoanneKenen) the health editor at Politico, is AHCJ’s topic leader on health reform and curates related material at healthjournalism.org. She welcomes questions and suggestions on health reform resources and tip sheets at joanne@healthjournalism.org. Follow her on Facebook.

Photo: Norman Mosjos via Flickr

The wave of mergers and acquisitions in health care in the age of reform hasn’t stopped – and three top-notch health policy experts in a recent guest post in Forbes explain why we should worry about that.

 

Martin Gaynor, a professor at Carnegie Mellon University and former top Federal Trade Commission official who specialized in health care; Farzad Mostashari,the CEO of Aledade, a company that helps primary care doctors form Accountable Care Organizations and the former national coordinator for health information technology; and Paul Ginsburg, director of Center for Health Care Policy at the Bookings Institution;  note that we won’t be able to solve our partisan divide over covering Americans until we figure out how to address the cost of health care.

“Driven by lack of competition, ever higher prices are being paid to hospitals, doctors and insurers without leading to better outcomes. It’s time to implement a competition policy for health care before Americans crumple under a system that is devouring family and government budgets,” they write. They note that a middle class family’s health spending has increased by about 25 percent since 2007.

Consolidation is occurring among both hospitals and insurers (even though the courts blocked two megamergers among insurers this year).

From 1998-2015, there were 1,412 hospital mergers. In many big urban areas, including Boston, Cleveland, Pittsburgh and San Francisco, one hospital system dominates – and an admission in those areas typically costs $2,000 more than in other places.

“Hospitals stifle competition even further by gobbling up physician practices,” they write. The share of physicians who are employed by hospitals rose rapidly from one in four as recently as 2012, to 38 percent  in 2015.

The big insurers also dominate and, as we’ve seen amid all the political paralysis over the Affordable Care Act, competition within the exchanges has decreased in many counties. The authors of this essay report that “simply adding one more insurer to an ACA marketplace reduces premiums for everyone by an average of 4.5 percent.”

And in case you think that these mergers are providing better health care, despite the economic concerns – not necessarily. “Perhaps most alarming, patients have worse health outcomes when hospitals face less competition. One important study found that Medicare beneficiaries who experienced a heart attack had a substantially higher chance of dying within a year if they were treated by a hospital that faced few potential competitors, relative to hospitals that had many competitors.

Brookings convened a summit on the topic, and came up with a package of recommendations to restore competition. Among them:

  • Change state and federal policies that encourage the mergers or benefit the giants. This includes addressing the problems consumers face when the cost of a doctor’s office visit soars because it’s now part of the hospital. Medicare should have one fee for an outpatient visit, no matter whether the doctor or hospital owns the office.
  • Make sure state licensing requirements don’t keep new competitors from entering the market. “New companies can inject much-needed innovation into healthcare – for example, through the use of newer technologies like telemedicine – and also keep prices lower and quality higher for everyone.”
  • Ban anti-competitive practices. “Hospitals frequently write contracts that prevent insurers from telling patients about less expensive or higher quality competitors. Similarly, dominant insurers insist that contracting hospitals not offer their services to other payers at lower prices. These sorts of practices should be prosecuted or outlawed.”
  • Have payments models and administrative frameworks that allow physicians to remain independent.

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