For Providers, Consolidation May Be Key To Staying Afloat, Experts Tell Senators

Consolidation has been the norm across healthcare for some time, and for those in the industry that want to stay independent, watching their peers unite can be intimidating.

Chris Thomas is the president and CEO of Community Hospital, an independent hospital located in Grand Junction, Colorado. He told a key Senate panel on Thursday that large systems have plenty of leverage against smaller, independent players.

“In our region, a larger health system acquired the largest hospital and is now bringing their health insurance products into our market,” Thomas said. “If they are successful at growing the number of lives covered by their health insurance products, we fear they will block access to our hospitals through tier products, driving more covered lives into their hospital.”

Thomas was one of several speakers at a Senate Finance Committee hearing on the state of consolidation in the industry. While consolidation among hospitals was center stage in the discussion, experts and lawmakers also dug into insurer consolidation, pharmacy benefit managers and the growing role of private equity in healthcare.

Thomas said his hospital is staying focused on its patients even as it watches the industry consolidate around it.

“I’m not implying the system hospitals do not care for their communities,” Thomas said. “What I’m simply saying is that we have one priority as a community hospital and that’s the patients in Grand Junction, Colorado. One of the main reasons that I’m so committed to our organization and our mission is that our board of directors has not once asked me to make more money.”

Zack Cooper, Ph.D., an associate professor of economics at Yale University, told the panel that over the last two decades there have been about 1,000 hospital mergers among the approximately 5,000 hospitals in the U.S.

He offered a list of steps that policymakers could take to slow down or address healthcare’s move toward consolidation.  For one, better enforcement of antitrust laws is crucial, Cooper said, and that would require allocating more funding toward that goal.

“There just simply aren’t enough cops on the beat,” he said.

Cooper also cited a lack of site-neutral billing in Medicare and the 340B drug pricing program as factors in consolidation.

“I think both are inadvertently leading hospitals and physicians to vertically integrate,” Cooper said.

R. Shawn Martin, the executive vice president and CEO of the American Academy of Family Physicians (AAFP), said that 73% of the approximately 129,000 physicians in the AAFP are employed by either a hospital system, health insurer or some other corporate entity.

Martin said acquisitions of family medicine practices have been driven by several key factors, including inadequate payments for physicians, a lack of investment in primary care, enrollment growth in public programs and incentives that reward organizations that do consolidate.

“Together, these factors have led independent practices to consolidate not from a position of opportunity, but to avoid economic ruin,” he said.

Karen Joynt Maddox, M.D., an associate professor of medicine at Washington University, talked about the growing and somewhat opaque role of private equity that fuels mergers and acquisitions. The data on these deals are sparse, Maddox said.

She said she estimates that in the hospital industry, institutions backed by private equity money make up about 10% of the market.

“Given the broad involvement of private equity in healthcare, there’s not a chance to go back when we remove this influence from the economic milieu of the field,” said Maddox. “And while private equity is the latest major entrant, the U.S. healthcare system is broadly based on corporate profit-maximizing strategies across subsectors of the market, even among ostensibly nonprofit actors.”

“Consequently, lawmakers should pursue an updated policy response and strategies that steer profit motives more broadly so that competition can work and make things better rather than worse,” she said.

Industry groups pushed back on some of the topics of discussion during the hearing. The American Hospital Association (AHA) argued in a statement that consolidation means hospitals can provide better patient care.

It can also mean survival, the organization said.

“Mergers can allow struggling hospitals to remain open. Without mergers, hospitals could shutter, patients could lose access to care, and communities could suffer,” the AHA said in the statement. “This is particularly important for rural hospitals, where mergers and acquisitions have played a critical role in preserving access to care for these patients and communities.”

David Merritt, senior vice president of policy and advocacy for the Blue Cross Blue Shield Association, said in a statement that “the growing trend of big hospitals acquiring independent physician practices is making health care less affordable for too many Americans. When corporate hospital systems acquire physician practices, the prices they charge grow by an average of 14%.”

Merritt argued that patients pay the same price for visiting a physician’s office as they would pay for hospital outpatient care, rates that are two to three times higher.

“Those higher rates hit patients with higher premiums and higher costs, because as the underlying prices of health care go up, so, too, does the cost to consumers,” Merritt said. “No patient should pay more for a service delivered at the doctor’s office simply because it’s now owned by a hospital.”


Source Link