Mergers and acquisitions among healthcare providers may result in a rise in healthcare costs and health insurance premiums.
A wave of mergers among hospitals and physician groups that has swept the United States in the past few years has some experts concerned that healthcare providers are gaining too much market power.
At one time, these mergers consisted of two or more competitor hospitals joining forces. These types of mergers still happen. But hospitals are also teaming up with physician practices, outpatient clinics, and other healthcare facilities to form super-sized health systems.
Each consolidation of providers is unique. But all of them affect the people who rely on the hospitals and doctors’ offices in their community.
Molly Rosbach, a health journalist with the Yakima Herald, provides a glimpse of what goes into a merger and how it can affect patients.
Executives of Yakima Valley Memorial Hospital in Washington went on a search for a partner or buyer in an effort to save their independent community hospital.
Throughout the search process, those who would be affected by the merger began to raise their concerns. Would the hospital have to switch electronic medical records? How many local jobs would be lost if the combined entity needed to cut costs to offset the investment? Would there be a loss of local control or services?
After a year of searching, a partnership was established between Yakima Valley Memorial and Seattle’s Virginia Mason Health System. But the announcement has not made it any clearer what this joint venture means for patients and the community.
The Memorial-Virginia Mason deal is an example of hospitals surviving and growing through partnership.
Healthcare systems can also use their financial strength to snatch up other hospitals and physician groups — all of which can carry other kinds of baggage.
In the past few years, the number of Catholic hospitals in the country has grown. This is partially through Catholic health systems absorbing other hospitals, some of them non-religious organizations.
Some groups have raised concerns that these types of consolidation threaten women’s access to reproductive healthcare, as acquired hospitals fall under the restrictions of the Catholic health systems. According to a report by the MergerWatch Project and the American Civil Liberties Union, church doctrine prohibits a wide range of services at their facilities, including contraception, many infertility treatments, and abortion care.
The reasons for consolidation of healthcare providers vary. Some health systems bet on bigger as a means to greater efficiency and better coordination of care.
For example, consolidation may mean patients can receive most of their care within a single health system. Or costs can be cut as administrative services — such as electronic medical records — are shared over a wider number of facilities.
Recently, though, the Affordable Care Act has been blamed for an increase in mergers and acquisitions in the healthcare industry. In September, Congress held hearings on consolidation in the health insurance industry, in particular between Anthem and Cigna, and Aetna and Humana.
The hearings also touched on the role of the healthcare act in driving consolidation among providers. The discussion split along party lines.
Democrats called the ACA a reaction to the consolidation that already was occurring. Republicans said the health law stifled competition and provided payment incentives that encourage consolidation.
According to research firm Irving Levin Associates, as of August there had been more U.S. hospital deals in 2015 than during the same time period in any previous year since 1999. This upward trend includes a spike in 2010, the year the healthcare law was passed.
But recent changes in Medicare and Medicaid may also be driving some of the consolidation.
Earlier this year, Health and Human Services officials announced that 30 percent of Medicare payments would be tied to alternative models. This includes accountable care organizations that focus on integrated and coordinated care.
These new payment models don’t require mergers and acquisitions. But health systems may be gathering all the pieces needed to take better overall care of patients — hospitals, physicians groups, outpatient laboratories, and imaging centers.
There is another reason for an increase in consolidations, one that may not attract as much attention. Health systems may be growing larger in order to demand higher payments from private health insurance companies. While this boosts the providers’ bottom line, the benefits to patients are less clear.
Some experts are concerned that the providers’ increased market share is driving up the health insurance rates without a corresponding improvement in the quality of care provided.
In 2010, Dr. Robert Berenson, a researcher with the Urban Institute, looked at how California hospitals banded together to grow their market power and increase their leverage against insurers.
The providers’ tactic worked. In some cases, insurers paid hospitals and physician groups more than 200 percent of what Medicare would for the same services.
Nationally, insurers pay hospitals and physicians on average only 20 to 30 percent higher than Medicare rates. But while providers made out well, this also translated into higher insurance premiums in the California healthcare market.
A 2012 report by the Robert Wood Johnson Foundation found a similar rise nationwide in prices after hospital consolidations, sometimes exceeding 20 percent after a merger.
However, another study by the nonprofit Altarum Institute found no link between hospital consolidation and prices.
Berenson calls the providers’ use of their growing market power to negotiate higher rates the “elephant in the room” that is rarely mentioned.
But it may be gathering more attention during the U.S. presidential race. On the campaign trail, Democratic presidential candidate Hillary Clinton has spoken out about both health insurer and provider mergers.
“As we see more consolidation in healthcare, among both providers and insurers, I’m worried that the balance of power is moving too far away from consumers,” Clinton said in a statement.