FTC Ramps Up Efforts Against Hospital Consolidation in Wake of Rising Costs
In June 2024, a class-action lawsuit against Hartford HealthCare (HHC) in Connecticut exposed the reality of hospital consolidation: dramatically inflated medical costs. The lawsuit claims that Hartford HealthCare, a dominant force in Connecticut's healthcare landscape, leverages its market power to overcharge for medical services, such as colonoscopies which cost $3,800 at HHC’s St. Vincent’s Medical Center compared to just $1,400 at nearby Bridgeport Hospital, owned by Yale New Haven Health. This drastic difference in pricing underscores a broader, concerning trend impacting the U.S. healthcare system, and the Federal Trade Commission (FTC) is taking notice.
Hospital consolidation has been reshaping the healthcare system, characterized by a surge in mergers and acquisitions—from horizontal and vertical mergers to cross-market consolidations. The American Hospital Association notes a significant uptick in such activities, with over 2,000 mergers since 1998. This trend has led to an increase in the number of community and nonprofit hospitals integrated into larger systems, rising from 53% in 2005 to 68% in 2022, according to Kaiser Family Foundation research. Such market dominance has serious implications, limiting competition and choice, escalating costs, and potentially degrading the quality of care provided to patients.
The Detrimental Impacts of Hospital Consolidation
Higher Prices
Hospital consolidation typically results in higher healthcare costs, affecting patients, employers, and taxpayers through reduced competition. Mergers provide hospitals greater leverage over insurance negotiations, often leading to increased prices. Research has shown that hospitals in concentrated markets secure higher reimbursement rates, which drives up premiums and overall costs. A New England Journal of Medicine study confirms that acquisitions lead to higher prices for commercially insured patients, while a Harvard Business School report indicates cross-market mergers also contribute to rising costs. In areas with high hospital concentration, Marketplace insurance premiums are 5% higher than in less concentrated markets. Hospitals without nearby competitors can charge prices 12% higher than those in competitive markets, imposing a significant financial burden on patients. Given that hospitals constitute 42% of Americans' premium dollars, a 12% price increase translates into more than $1,000 annually for families and about $370 for single people on employer-sponsored plans. These price increases significantly burden consumers, especially under the strain of high-deductible health plans (HDHPs), exacerbating the healthcare affordability crisis. Making matters worse, even with regulations requiring hospitals to be transparent about their pricing, comparison shopping for healthcare services remains difficult. Inconsistencies in how hospitals present pricing information and a lack of standardization make it challenging for patients to accurately compare costs across different providers, further limiting their ability to make informed choices.
Reduced Access and Quality of Care
Despite potential efficiencies, evidence suggests consolidation may compromise care quality, affecting patient experience, mortality rates, and service accessibility. A New England Journal of Medicine study noted a decline in patient satisfaction following mergers, without improvements in readmission or mortality rates. Experts from a Penn LDI seminar highlight that consolidation often leads to higher prices without quality gains, particularly impacting access in consolidated markets. Rural and underserved areas suffer most, experiencing reductions in essential services such as obstetrics, and even specialized services like pediatric care are curtailed, increasing wait times and pressure on remaining providers. This consolidation-driven reduction in services can translate into restricted access to care for patients. Longer wait times for appointments, the need to travel greater distances to find available specialists, and the closure of facilities in underserved communities all create significant barriers to receiving timely and appropriate care.
Negative Impacts on Healthcare Workers
Consolidation also detrimentally impacts healthcare workers by typically leading to lower wages, heavier workloads, and reduced job mobility. Hospitals gain market power that suppresses wages, especially for skilled professionals such as nurses. Increased workloads and staffing shortages result in burnout and higher turnover. Notably, a complaint by labor unions against UPMC highlighted anti-competitive practices that worsen working conditions for healthcare staff.
Ethical Concerns
The ethical implications of consolidation are profound, often prioritizing profit over patient care, exacerbating health disparities and limiting access for marginalized communities. The closure of services in economically disadvantaged areas or restrictions imposed by new owners can severely impact vulnerable populations. As noted by Penn LDI, such practices especially affect low-income women and rural residents, challenging the foundational ethics of healthcare.
These issues underscore the need for a high level of scrutiny around mergers and policies that prioritize patient care quality, affordability, and fair labor practices in the face of ongoing hospital consolidation.
The FTC’s Fight Against Anti-Competitive Mergers
Amid growing concerns about the negative effects of hospital consolidation, the Federal Trade Commission stands as a key defender of patient interests and market competition in healthcare. Under the Biden Administration, the FTC has intensified its stance against anti-competitive mergers, demonstrating a strong commitment to safeguarding consumers from the adverse outcomes of unchecked consolidation.
The FTC has notably succeeded in obstructing several hospital mergers recently. For example, in June 2024, Novant Health in North Carolina canceled its acquisition plans for two hospitals after the FTC argued that the deal would create near-monopoly conditions, leading to higher prices and diminished care quality. Other successful FTC actions include blocking RWJBarnabas Health's merger with St. Peter’s Healthcare System in New Jersey in June 2022, and a similar intervention in March 2022 against a merger between Hackensack Meridian Health and Englewood Healthcare Foundation.
These victories highlight a shift towards more assertive regulatory actions, reflecting the FTC’s renewed vigor under the Biden Administration’s directives. In July 2021, President Biden issued an executive order encouraging greater antitrust enforcement to foster a competitive healthcare marketplace. This order critiqued the rampant hospital mergers and directed the FTC to enhance its antitrust enforcement, even allowing for the retrospective challenge of mergers that might have anti-competitive effects.
As per Kaiser Health News reports, this directive has rejuvenated FTC efforts, increasing the agency’s readiness to tackle hospital mergers that might have previously been overlooked. ProPublica’s analysis indicates a significant uptick in enforcement, with the FTC blocking four mergers in the first two years of Biden’s presidency, compared to fewer than one per year during the previous administration.
Evolving Enforcement Strategies
The FTC is also broadening its enforcement strategies, exploring new legal theories and focusing more on diverse aspects of market competition, including labor markets. FTC Chair Lina Khan emphasized in December 2021 the importance of examining how mergers affect not just prices but also employment conditions, highlighting the potential of increased antitrust actions to improve pay and working conditions for healthcare workers.
Moreover, the FTC is scrutinizing vertical mergers more closely, such as those involving hospitals acquiring physician practices, which had traditionally been perceived as beneficial for efficiency. Recent studies, however, suggest these mergers might increase prices and reduce competition, as hospitals gain more control over referrals and insurer negotiations.
This proactive approach by the FTC, fueled by the Biden Administration’s push for more competition, marks a potential turning point in the battle against the detrimental impacts of hospital consolidation. This shift underscores a comprehensive strategy to protect competition and patient welfare in the healthcare sector.
Limitations of Current Enforcement Mechanisms
Despite the FTC's strong stance against anti-competitive hospital mergers, the agency confronts significant barriers that hinder its effectiveness in tackling consolidation. These challenges stem from outdated guidelines, limited resources, and the complexities of proving competition harm in complex healthcare markets.
The FTC's enforcement focus has been predominantly on single-market mergers, as per guidelines last updated in 2010. This approach overlooks the rising trend of cross-market mergers, where healthcare entities expand across different regions, enhancing their market power and leverage over insurers. The effects of these mergers can significantly diminish competition even without direct geographic overlap.
Moreover, stagnant funding levels have strained the FTC's capacity to adequately investigate and legally contest the growing volume of hospital mergers. According to ProPublica, the agency's budget constraints limit its ability to hire necessary expert staff and sustain prolonged legal battles against well-funded healthcare giants. Consequently, many potentially harmful mergers proceed without challenge, consolidating markets further and reducing competition.
Challenging cross-market mergers in court presents its own set of hurdles. These cases tend to lack solid legal precedents, complicating the FTC's task of demonstrating their anti-competitive nature. The nuanced market dynamics involved, such as insurer behavior and potential spillover effects, add to the complexity, making it difficult for the FTC to establish clear legal grounds for opposition.
To truly curb anti-competitive hospital mergers, the FTC needs updated guidelines that reflect the realities of cross-market mergers, increased funding for enforcement activities, and innovative legal strategies to tackle these complex consolidations effectively.
The Medical Credit Card Blind Spot
As policymakers and regulators grapple with the complex issue of hospital consolidation, a related problem is emerging that demands attention: the proliferation of medical credit cards and their disproportionate impact on vulnerable patients. These financial products, often promoted by healthcare providers themselves, are creating a new avenue for medical debt, trapping patients in a cycle of high-interest payments and jeopardizing their financial security.
The Consumer Financial Protection Bureau (CFPB) reports a staggering growth in medical credit card use, with the number of cardholders nearly tripling in the last decade. From 2018 through 2020, Americans charged almost $23 billion in healthcare expenses to these cards, accumulating over $1 billion in deferred interest payments alone. This trend is particularly concerning for older Americans, whose unpaid medical debt has surged in recent years, reaching $53.8 billion in 2020.
The promotion of these cards by healthcare providers, who often receive financial incentives from credit card companies, raises serious ethical concerns. Patients, facing the stress of a medical diagnosis or treatment, are particularly vulnerable to persuasive sales tactics and may not fully understand the complex terms of these credit products. This practice is especially egregious when providers push these cards onto patients who might be eligible for financial assistance programs (FAPs), designed to help low-income patients cover medical expenses.
To protect patients from predatory medical credit practices, policymakers must implement regulations. This includes prohibiting deferred interest promotions, capping interest rates on medical credit cards, requiring clear and conspicuous disclosures of terms and conditions, and strengthening enforcement of FAP requirements to ensure eligible patients are aware of and receive the financial assistance they deserve. We must address this blind spot to prevent unnecessary medical debt and safeguard the financial well-being of vulnerable Americans.
A Multi-Pronged Policy Strategy
Addressing the pervasive effects of hospital consolidation requires a comprehensive strategy aimed at fostering a competitive, patient-centered healthcare system. This strategy must include bolstering antitrust enforcement, revising payment models, regulating medical credit practices, and empowering patients as informed consumers.
Strengthening Antitrust Enforcement:
The FTC's current efforts, while commendable, fall short in tackling the full breadth of consolidation issues. As discussed, guidelines need updating to address cross-market mergers explicitly. This includes assessing the broader implications of mergers that impact common customers across different markets. Congress should also enhance FTC funding, enabling more investigations and legal actions against complex healthcare mergers.
Reforming Payment Models:
The prevailing fee-for-service model, which rewards quantity over quality, exacerbates consolidation as providers seek greater market dominance. Transitioning to shared-risk and population-based payment models, as suggested by the Health Care Payment Learning and Action Network, would incentivize providers to prioritize care quality and efficiency. Supporting smaller providers in this transition is necessary, including offering infrastructure investments and adapting risk arrangements to ensure their viable participation in value-based care.
Empowering Patients as Consumers:
We have to empower patients to become knowledgeable consumers. This involves improving price transparency and access to comprehensive quality and performance data, enabling patients to make informed healthcare choices. Policies should also promote patient involvement in decision-making processes, ensuring treatments align with patient preferences and values.
Addressing Integrated Finance and Delivery Systems Concerns:
While systems integrating insurance and healthcare provision can enhance coordination and efficiency, they also pose risks of further consolidating markets and reducing competition. Regulatory oversight is essential to curb anti-competitive practices and ensure these systems do not disadvantage certain patient groups or perpetuate health disparities.
Conclusion
The Hartford HealthCare lawsuit exemplifies the repercussions of unchecked hospital consolidation. This trend, left unaddressed, threatens to compromise the accessibility and affordability of healthcare, deepening disparities and imposing undue financial strain on Americans.
The urgency for comprehensive healthcare reform has never been more apparent. It is time that all stakeholders — policymakers, healthcare providers, patient advocates, and the public — collaborate to redefine the priorities of our healthcare system. We must advocate for a system that values patient well-being above profit, promotes fair competition, and ensures that care quality is rewarded.
By taking decisive action and implementing targeted reforms, we can address the pervasive issues brought on by hospital consolidation. This collective effort is essential to fostering a healthcare environment that upholds the highest standards of equity and excellence, ensuring that all Americans have access to the care they need at prices they can afford.