Taming Giants in the Health Care Industry

Taming Giants in the Health Care Industry

January 8, 2022 Off By administrator

Scholars explore potential antitrust responses to growing consolidation among health care providers.

How big is too big?

This question has plagued health care regulators for decades. Over the past twenty years, the U.S. health care system has seen rapid consolidation in hospital, physician, and insurance markets. With mergers and acquisitions expected to increase, it may be time to reimagine antitrust in the health care context.

Since 2010, more than a thousand U.S. hospital mergers have been executed, causing the vast majority of hospital markets to become highly concentrated. In some cities, such as Boston and Pittsburgh, only one or two hospital systems dominate the entire market. At the same time, hospitals have also increasingly acquired physician practices, with over a third of all physicians now employed by hospitals. In 2018, the percentage of physicians employed by another entity surpassed the percentage of physicians who own their own practice.

These consolidations can have a sizable impact on patients. Although some proponents argue that hospital acquisitions can reduce costs and improve care coordination, many studies have shown that hospital and physician consolidations have led to higher prices, increased insurance premiums, and lower quality of care. As health care systems develop larger market shares, they can demand higher rates when negotiating with insurers.

In recent years, the Federal Trade Commission (FTC) has attempted to rein in the number and impact of hospital-physician mergers. Between 2000 and 2018, almost half of all FTC merger enforcement actions were in the health care sector.

Some experts, however, argue that current federal enforcement tools are inadequate to address rampant consolidation. For example, the majority of physician practice mergers are not reported to the FTC because they fall below the $92 million reporting threshold. Moreover, current antitrust enforcement guidelines make it difficult to regulate cross-market mergers—an increasingly common practice involving the merger of health care entities that do not compete in the same geographic or product markets.

Consolidation among providers may accelerate following the financial distress caused by the pandemic. With the Biden Administration poised to heighten enforcement efforts, mergers and acquisitions in the health care industry could be set for a shake-up.

In this week’s Saturday Seminar, experts discuss how different antitrust approaches can increase competition in health care markets.

  • In a report with the Hamilton Project, Martin Gaynor of Carnegie Mellon University’s Heinz College of Information Systems and Public Policy describes three policies to improve competition in health care markets. First, Gaynor recommends eliminating regulations that unintentionally encourage consolidation. For example, Medicare currently pays more for the same physician service if it is owned by a hospital. Second, Gaynor calls for increased funding for antitrust…

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