Editor's Note: Welcome to Medical Economics' blog section which features contributions from members of the medical community. These blogs are an opportunity for bloggers to engage with readers about a topic that is top of mind, whether it is practice management, experiences with patients, the industry, medicine in general, or healthcare reform. The opinions expressed here are that of the authors and not UBM / Medical Economics.
The troubling trend of healthcare consolidation is gaining momentum, and Americans are paying a heavy price. Not only is this merger mania destroying our nation’s healthcare system, but it’s also decimating our middle class. However, if consolidation is healthcare’s cancer, consumers are the cure.
Every week, we hear reports of hospitals buying up doctor’s practices and merging with other hospitals. For example: Advocate Health Care and Aurora Health Care finalized their $11 billion deal last April to form the nation’s 10th largest tax-exempt health system; Dignity Health and Catholic Health Initiatives are marching toward a $28 billion deal.
More recently, we’ve heard about insurers merging with health providers and retail pharmacies: UnitedHealth’s subsidiary Optum is buying DaVita Medical Group, a group of several hundred independent doctors and clinics, for nearly $5 billion. In April, Medicare insurance giant Humana bought 22-clinic Family Physicians Group in Central Florida. Now rumor has it Walmart might buy Humana. And, of course, CVS Health Corp. and Aetna continue to move toward their $69 billion union.
Many, many smaller deals go through weekly.
Mergers were up 13 percent last year, setting a record for the most healthcare mergers and acquisitions in recent history, according to a Kaufman Hall report. The first quarter of 2018 was the busiest start for healthcare mergers in over a decade, according to Bloomberg.
None of this bodes well for consumers.
Regardless of what the merging parties say about streamlining care and greater efficiencies, when healthcare entities merge, costs only go one way: up, way up. Ask those trying to convince you of the benefits to point to one study that shows costs go down after a merger, or that quality goes up. They can’t.
A recent study from the nonprofit Physicians Advocacy Institute reported that hospitals buying up doctors was the leading driver in soaring Medicare costs. Between 2012 and 2015, Medicare costs rose $3.1 billion due primarily to the 49 percent uptick in hospital-employed doctors that occurred over the same period. And that study only looked at four procedures. Imagine the tally if all procedures were accounted for.
When hospitals merge, price increases on the order of 20 percent to 30 percent are common, and can exceed 50 percent, said Carnegie Mellon economist Martin Gaynor in a recent report. What’s more, he added, many studies have found that patient health outcomes are substantially worse at hospitals in concentrated markets where there is less competition.
The only parties who benefit when healthcare entities merge are the executives at the top.