Consolidation of large hospitals and health systems is on the political and policy radar screens of both Republicans and Democrats, offering a rare opportunity for action in a polarized Congress.
Janet Trautwein, who heads the National Assn. of Benefits and Insurance Professionals, explains how consolidation harms patients in “Healthcare Concentration Is Far From What the Doctor Ordered.”
Ninety percent of the nation’s hospital markets were considered “highly concentrated” in 2017, with many more mergers over the ensuing six years.
Consolidation can cut costs for hospitals, but the savings rarely are passed along to consumers. Hospital prices go up 6 to 20 percent when one merges with or acquires another, Trautwein writes. That leads to higher premiums but not a coincident increase in the quality of care.
The bureaucratization of medicine makes it extremely difficult and risky for physicians to remain in independent practice. Three out of four doctors now are employed by large hospital systems or health plans.
They turn over scheduling, billing, and negotiations with insurers to these conglomerates in exchange for a salary and some support staff.
Medical blogs show how this is decimating physician morale as doctors are forced to see eight or more patients an hour, with the “system” recommending expensive tests like vascular studies and abdominal ultrasounds they don’t necessarily believe are needed.
And instead of having a nurse on staff to answer patient calls, the calls may be rerouted to call centers overseas or having patients directed to urgent care centers (which the hospital systems often also own).
What to do? There is no silver bullet solution to reform how $4.3 trillion in private and public money is spent on health care every year. But it is important to begin.
Three key House committees have been working all summer to hash out details of an important health reform bill, the “Lower Cost, More Transparency Act.”
The House Energy and Commerce, Ways and Means, and Education and the Workforce committees have negotiated a package that focuses on health care price transparency, site-neutral payments, and extending funding to existing health programs that is set to expire.
Take site-neutral payments, for example. The Energy and Commerce Committee heard testimony earlier this year showing how those battling cancer are hurt by eliminating competition and limiting choices for patients.
Brian Connell of the Leukemia & Lymphoma Society testified about the importance of site neutral drug policies for cancer patients. Today, more than 45% of chemotherapy infusions for Medicare patients are done in higher-cost, hospital-owned centers, squeezing out lower-cost independent physician practices.
Patients suffer when they are forced to pay the higher copays and co-insurance associated with the higher hospital prices.
“Despite the patient going to the same office, being treated by the same staff, and receiving the same medication, the shift in underlying reimbursement—from the lower physician fee schedule to the higher hospital outpatient payment system—increases the patient’s out-of-pocket costs without any corresponding improvement to the quality of their care,” Connell testified.
“Cancer patients shouldn’t pay more simply because the nameplate on the clinic’s front door now says ‘hospital’ rather than ‘physician office.’
“Equalizing payments between these sites of service would weaken the incentive for provider consolidation, which would also produce long-term cost savings across insurance types and give patients additional options for their care,” Connell testified.
There is bi-partisan agreement in Congress and across the ideological spectrum in the think tank community on the problem.
The Third Way, for example, has a new report that explains: “Out-of-control hospital prices are part of a vicious cycle where hospital consolidation drives up prices and subverts the competition needed to keep costs in check. In turn, higher costs undermine the adequacy of Medicare payments to hospitals, which leads more hospitals to consolidate.”
And the Progressive Policy Institute also has launched a new center on Competition Policy to be headed by Dr. Diana Moss, an expert in anti-trust policy whose mission is “to advocate for strong competition enforcement and policy.”
The tri-committee bill was slated to come to the House floor for a vote on Monday night, but it was pulled at the last minute at least partly over a controversy over where the “savings” from site-neutral payments would go. The “site neutral” payment policy would have saved money to pay for several must-fund programs, such as Community Health Centers, graduate medical education, and diabetes care programs.
That was a misguided criticism. Current payment policies are a huge contributor to the consolidation in the hospital industry as they buy up private practices so they can bill more for their services. And the consolidation in turn allows monopolistic hospitals to charge more for many other services because they have bought up the competition.
The House bill begins to address the problem of hospitals billing up to four times more for the same services provided in a doctor’s office simply because it is a hospital. Hospitals, not surprisingly, object to the site-neutral payment provisions.
But that is not a reason to back down. Agreeing that hospital consolidation is a major cost driver that is impacting the entire health system is an important start.
The “Lower Cost, More Transparency Act” includes a number of other provisions, including stronger requirements for price transparency among many care and coverage providers and prescription drugs, and banning gag clauses and addressing hidden fees. The House should bring the bill back to the floor for a vote that would help patients by addressing key cost drivers in the health sector.
Grace-Marie Turner runs the Galen Institute, a non-profit research organization devoted to patient-centered ideas in health care. She can be reached at gracemarie@galen.org
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