Hospital Mergers: Impacts on Patients, Pricing, & Antitrust Concerns.

Over the past year, mergers and acquisitions across industries are seeing a spike while appropriations to the antitrust division of the Department of Justice have remained the same. Included in this most recent spate of mergers are hospital systems. Hospitals are merging at record rates and PricewaterhouseCoopers predicts hospital system mergers to continue to grow. As hospitals continue to merge, they have started to form new conglomerates in the healthcare industry. One recent example is the merger between Catholic Health Initiatives and Dignity Health, forming CommonSpirit Health.

CommonSpirit Health has sites across 21 states, 150,000 employees and over $30 Billion in revenue. With 90 percent of Metropolitan Statistical Areas considered highly concentrated for hospitals as of 2016, these mergers beg the question of whether patients are benefitting. Furthermore, what are the anti-trust implications of highly consolidated regional hospital systems?

A new study from the American Hospital Association claims “hospital acquisitions are associated with a statistically significant 2.3% reduction in annual operating expenses at acquired hospitals.” The American Hospital Association suggest that by combining administrative functions among hospital systems they can pass these savings onto patients. However, a recent class-action lawsuit against Sutter Health disputes this notion. Sutter Health – a Northern California health system – is accused of using its market dominance to drive up the cost of services. With such a high level of regional market control, hospital systems like Sutter Health use “all-or-none” contracting with insurance companies to demand higher prices for services. These costs trickle down to patients with higher premiums and co-pays.

Patient advocates attribute the Sutter Health lawsuit to lax anti-trust practices when it comes to hospital mergers. While anti-trust officials have the time and resources to focus on blockbuster industry mergers such as CVS-Aetna, smaller mergers among regional hospitals and healthcare service providers go unnoticed. An example of such mergers is Anne Arundel Medical Center and Doctors Community Health System merging to form Luminis Health in Maryland. These regional mergers often evade the eyes of regulators and patient advocates warn of their potential to drive up costs by dominating regional markets and rarely if ever lower costs.

An industry-funded study [ST1] from Deloitte points out, however; that mergers and acquisitions in health systems lead to investments and improvements on acquired facilities and lower operating costs. This same study also pointed to specific improvements in patient reducing patient mortality, reducing wait times and reducing readmissions. These are all factors anti-trust officials should consider when deciding whether to challenge a merger. Anti-trust officials simply don’t have the resources to analyze these deals;leaving patients footing the bill for increased costs. Hospital costs continue to remain the largest overall share of healthcare spending in the United States. To lower healthcare costs and improve patient outcomes, it is time for regulators to examine these regional health system mergers and their vast implications on patient outcomes and pricing.

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