Stop hospital consolidation to lower health care prices for all Americans

With 2023 bringing divided government and inflation at levels not seen in decades, reducing health care costs is a political and moral imperative. Over the years, Americans have found that insurance coverage alone does not equal access, and that despite near-universal health insurance coverage, according to the U.S. Census Bureau, more than one in five Americans still have difficulty paying for their health care . In order to be treated, patients must be able to afford the care they need.

Half of the nation’s health care spending is spent on care provided in hospitals and clinics, and both markets suffer from the evils of monopoly. In a recently published paper, we outline pragmatic solutions to address hospital monopoly power to reduce patient costs.

Last year, Sens. Mike Lee (R-Utah) and Amy Klobuchar (D-Minn.) held a hearing on hospital consolidation, highlighting a rare issue uniting both Democrats and Republicans in today’s turbulent political environment. According to the Kaiser Family Foundation, hospital market power has already reached a critical level, with 90 percent of metropolitan statistical areas considered highly concentrated for hospital care, and hospitals driving even greater consolidation by purchasing physician practices. The monopoly is the natural product of over 1,500 mergers over 20 years and federal policy to support consolidation.

Research clearly demonstrates the disadvantages of monopoly—hospital consolidation leads to higher insurance premiums, higher prices for hospital services, and higher consumer cost-sharing, while generating a diminished patient experience. Patients know what this means: big bills that arrive months or even a year after their treatment.

It is refreshing that Congress is getting ahead of us with practical proposals to support competition in the delivery of care to the benefit of both patients and physicians.

Unfortunately, at the same time, health systems have become more creative – and not in how they deliver care to patients. The dominant systems today include so-called “anti-referral” or “anti-differentiation” contract clauses that prevent health plans from referring patients to other low-cost, high-quality doctors; a 2018 case filed by the Justice Department’s Antitrust Division against Atrium Health highlighted this practice. To identify the prevalence of these practices, policymakers should direct the FTC and the DOJ’s antitrust division to investigate these practices and give the FTC the authority to crack down on rampant anticompetitive behaviors like these.

In addition, researchers and antitrust agencies should be empowered to focus on targeted areas in need of federal competition enforcement through the regular publication and dissemination of a state competition index. The State Competition Index will include data on mergers, licensing requirements and concentration in service markets in addition to data transparency.

Although medical procedures can often be performed safely and completed in an outpatient setting with less cost and inconvenience to the patient, government regulations often mandate that the procedures be provided only in a hospital setting, thus strengthening the dominance of the hospital market. By preventing this unnecessary intrusion into medical decision-making, Congress can prevent regulatory agencies from determining place of care and allow patients and physicians to immediately take advantage of medical advances and decide when, where, and how care should be provided.

Finally, Congress can encourage the growth of new small businesses. In 2010, as part of the negotiations to pass the Affordable Care Act, the hospital industry convinced Congress to enact a ban that would prevent new physician-owned hospitals from participating in Medicare. Acknowledged by the CEO of the American Hospital Federation in an Advisory Council interview in 2021, this was a key and publicly proclaimed victory, barring competitors in the hospital industry.

The ban on new facilities participating in Medicare — which can account for up to a third of a hospital’s revenue — took away the possibility of hospital ownership by physicians, those with the best knowledge of patient care. With recent research showing that physician-owned hospitals can improve quality and reduce costs, policymakers should support bills in the House and Senate to right this wrong.

With hospital monopolies eating away at Americans, now is the time for sensible reforms to encourage choice and competition. This is our profession’s prescription for a better system for all.

Brian J. MillerMD, MBA, MPH is an assistant professor of medicine and business (courtesy) at Johns Hopkins University and a foreign fellow at the American Enterprise Institute.

Jesse M. EhrenfeldMD, MPH is senior associate dean of the Medical College of Wisconsin and president-elect of the American Medical Association.

The views expressed here are those of the authors and do not necessarily reflect those of their employers.

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