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House Committee Holds Hearing on Healthcare Consolidation

Various legal experts testified before House lawmakers during a hearing Thursday concerning the recent rise in healthcare provider consolidation, with some calling for strict antitrust enforcement and oversight while others defended consolidation as a necessary step toward improving quality and efficiency.

The vast majority of Americans are currently subject to monopoly power in their local hospital markets, said Barak Richman, JD, PhD, a healthcare economics, law and policy professor at the Duke University School of Law in Durham, N.C., during his testimony before the House Committee on the Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law.

Dr. Richman said a wave of mergers and acquisitions in the 1990s caused prices to rise significantly, increasing as much as 40 percent when the merging hospitals were within close proximity to one another. A second merger wave from 2006 to 2009 continued to drive up hospital consolidation, he told lawmakers. The resulting provider monopoly power — permitted by "failures of antitrust policy" — has driven up costs for American consumers, he said. Dr. Richman advised policymakers to carefully monitor the creation of accountable care organizations under the Patient Protection and Affordable Care Act, saying the new alliances pose a "serious danger" and could give providers even more market power.

The PPACA has done little to address the hospital market monopoly problem and may even make it worse, testified Thomas Miller, JD, a resident fellow in health policy studies at the American Enterprise Institute. He told lawmakers the healthcare reform law will entrench already dominant providers, dampen start-up efforts and encourage further consolidation to increase market share. He recommended lawmakers adopt various pro-competitive strategies such as monitoring ACOs, promoting interregional competition in healthcare services and challenging anticompetitive provisions in provider-payer contracts.

Joe Miller, JD, similarly testified about the harmful effect of healthcare provider consolidation. Mr. Miller — general counsel for America's Health Insurance Plans — said a highly competitive healthcare system is best for providing innovative, affordable and high-quality care. He also advised policymakers to closely monitor ACOs and urged federal antitrust enforcement officials to be vigilant.

The committee also heard from Thomas Greaney, JD, a professor of law at the Saint Louis University School of Law. He said the success of the PPACA depends on provider competition, and the recent wave of mergers and acquisitions is the result of provider efforts to avoid the pro-competitive nature of the law. He told policymakers they should enact countermeasures to combat provider monopolies such as Medicare reimbursement reforms.

David Balto, JD — who has helped guide Federal Trade Commission healthcare enforcement efforts in the past — testified that antitrust enforcers must be more proactive in helping state and federal officials regulate payer and provider market power. Furthermore, the healthcare reform law and the need to control costs shouldn't become the basis for approving "problematic" mergers between payers, he said.

However, not all of the witnesses at the hearing decried consolidation or called for diligent federal scrutiny. Sharis Pozen, JD, of powerful lobbying firm Skadden, Arps, Slate, Meagher & Flom, spoke on behalf of the American Hospital Association, saying mergers and acquisitions are often essential for providers to achieve their goals of improving quality and lowering costs. Ms. Pozen — who formerly led the Antitrust Division at the U.S. Department of Justice — told lawmakers that "outdated regulatory barriers" can keep hospitals and doctors from working closely together unless they're under the same ownership. Furthermore, she said the rate of acquisition activity has been exaggerated. A recent AHA study found only 10 percent of the nation's hospitals were involved in a merger or acquisition between 2007 and 2012, she said. These transactions weren't anticompetitive and benefited the affected patients and communities, according to Ms. Pozen.

More Articles on Hospital Consolidation:
What Happens When Goliath Buys David? The Effects of Healthcare Consolidation
5 Issues Forcing Standalone Hospitals to Consider the M&A Market
The "Curse" of Academic Medical Center, Community Hospital Mergers 

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