By Merrill Goozner | August 23,
2018
Community opponents of two
pending healthcare mergers need to ask themselves whether antitrust enforcement
is really the best approach for lowering healthcare costs.
In Massachusetts, Beth Israel Deaconess Medical Center and Lahey Health want to join together to create a network that, in their view, will pose a credible competitive challenge to Partners HealthCare, the academic behemoth that dominates the Boston region. The Massachusetts Health Policy Commission, the state’s attorney general and a coalition of community groups are opposing the merger, saying it will only lead to higher prices and won’t produce the promised administrative efficiencies.
In western North Carolina, Asheville-based Mission Health wants to sell its hospital assets to HCA Healthcare, the nation’s largest for-profit hospital chain. While the community would get a well-endowed foundation in exchange, there’s concern that rural areas will be slighted by the new owners and fear the system’s charitable care contributions will plummet under HCA.
Most healthcare economists view these pending mergers with intense skepticism. They believe the cure for rising healthcare costs lies in introducing more competition into the system, not promoting further consolidation.
Former antitrust enforcer Martin Gaynor, now at Carnegie Mellon University, is pushing hard for a dramatic overhaul of federal policy. Over the past decade, and especially since passage of the Affordable Care Act, the federal government has tacitly supported consolidation. The Obama administration believed large, integrated organizations would have a greater capacity to make the shift to value-based care.
But with the Trump administration dialing back value-based reimbursement, many leading economists are now calling for vigorous antitrust enforcement. To promote new entrants, they want to repeal of certificate-of-need requirements and any-willing-provider laws, which prevent insurers from using narrow networks.
They are also calling for states to discontinue the use of certificates of public advantage. COPAs shield mergers from antitrust scrutiny in exchange for state oversight of price increases.
The academic literature is filled with studies suggesting healthcare mergers lead to higher prices. But the belief that increased competition will quickly achieve the opposite defies both experience and common sense. New entrants in healthcare, whether stand-alone emergency departments, ambulatory surgical clinics or urgent-care clinics, have not had a measurable impact on prices. In fact, they’ve led to more utilization, not less. Supply-induced demand is alive and well in healthcare.
On the other hand, there’s mounting evidence that direct price controls work. Two decades ago, North Carolina gave Mission Health an antitrust pass when it merged with its largest rival. Its COPA led to aggressive state oversight and relatively moderate price increases.
But in 2015, the state repealed its COPA. Price oversight ended. Mission’s operating margins leaped from 1.6% in 2014 to 4.1% in 2017, according to Modern Healthcare’s financial database. No wonder HCA is willing to pay a hefty price for a system dominant in its region.
A few states are moving down the price control path. Massachusetts is considering ways of leveling reimbursements so the prestige-driven prices at Partners move closer to those of surrounding community hospitals.
Legislators in California are advancing a bill that would establish all-payer rate setting, where every payer—Medicare, Medicaid and private insurers—pays the same price to all providers. It’s been used in Maryland since the 1970s.
There’s no doubt healthcare needs a healthy dose of competition. But antiquated antitrust laws are never going to unwind the mergers that have left most markets dominated by a handful of providers and insurers.
Budget and price caps that reduce total spending over time, and force consolidated providers and insurers to compete within those limits, may be the better way to go.
In Massachusetts, Beth Israel Deaconess Medical Center and Lahey Health want to join together to create a network that, in their view, will pose a credible competitive challenge to Partners HealthCare, the academic behemoth that dominates the Boston region. The Massachusetts Health Policy Commission, the state’s attorney general and a coalition of community groups are opposing the merger, saying it will only lead to higher prices and won’t produce the promised administrative efficiencies.
In western North Carolina, Asheville-based Mission Health wants to sell its hospital assets to HCA Healthcare, the nation’s largest for-profit hospital chain. While the community would get a well-endowed foundation in exchange, there’s concern that rural areas will be slighted by the new owners and fear the system’s charitable care contributions will plummet under HCA.
Most healthcare economists view these pending mergers with intense skepticism. They believe the cure for rising healthcare costs lies in introducing more competition into the system, not promoting further consolidation.
Former antitrust enforcer Martin Gaynor, now at Carnegie Mellon University, is pushing hard for a dramatic overhaul of federal policy. Over the past decade, and especially since passage of the Affordable Care Act, the federal government has tacitly supported consolidation. The Obama administration believed large, integrated organizations would have a greater capacity to make the shift to value-based care.
But with the Trump administration dialing back value-based reimbursement, many leading economists are now calling for vigorous antitrust enforcement. To promote new entrants, they want to repeal of certificate-of-need requirements and any-willing-provider laws, which prevent insurers from using narrow networks.
They are also calling for states to discontinue the use of certificates of public advantage. COPAs shield mergers from antitrust scrutiny in exchange for state oversight of price increases.
The academic literature is filled with studies suggesting healthcare mergers lead to higher prices. But the belief that increased competition will quickly achieve the opposite defies both experience and common sense. New entrants in healthcare, whether stand-alone emergency departments, ambulatory surgical clinics or urgent-care clinics, have not had a measurable impact on prices. In fact, they’ve led to more utilization, not less. Supply-induced demand is alive and well in healthcare.
On the other hand, there’s mounting evidence that direct price controls work. Two decades ago, North Carolina gave Mission Health an antitrust pass when it merged with its largest rival. Its COPA led to aggressive state oversight and relatively moderate price increases.
But in 2015, the state repealed its COPA. Price oversight ended. Mission’s operating margins leaped from 1.6% in 2014 to 4.1% in 2017, according to Modern Healthcare’s financial database. No wonder HCA is willing to pay a hefty price for a system dominant in its region.
A few states are moving down the price control path. Massachusetts is considering ways of leveling reimbursements so the prestige-driven prices at Partners move closer to those of surrounding community hospitals.
Legislators in California are advancing a bill that would establish all-payer rate setting, where every payer—Medicare, Medicaid and private insurers—pays the same price to all providers. It’s been used in Maryland since the 1970s.
There’s no doubt healthcare needs a healthy dose of competition. But antiquated antitrust laws are never going to unwind the mergers that have left most markets dominated by a handful of providers and insurers.
Budget and price caps that reduce total spending over time, and force consolidated providers and insurers to compete within those limits, may be the better way to go.
Merrill
Goozner served as Editor of Modern Healthcare from December 2012 to April 2017.
As Editor Emeritus, he continues to write a weekly column, participate in
Modern Healthcare education, events and awards programs and provide guidance on
coverage related to healthcare transformation issues. Over the course of his
four decades in journalism, he served as a foreign, national and chief
economics correspondent for the Chicago Tribune and professor of journalism at
New York University. He is the author of The $800 Million Pill: The Truth
Behind the Cost of New Drugs (University of California Press, 2004), and has
contributed articles to numerous publications. Goozner earned a master's degree
in journalism from Columbia University and a bachelor's in history from the
University of Cincinnati, where he received the Distinguished Alumni Award in
2008.
http://www.modernhealthcare.com/article/20180823/NEWS/180829952?utm_source=modernhealthcare&utm_medium=email&utm_content=20180823-NEWS-180829952&utm_campaign=dose
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