The New York Times has an interesting article in its September 18th, 2014 issue by Robert Pear entitled, “F.T.C. Wary of Mergers by Hospitals.”
In summary, the article describes how the Federal Trade Commission (F.T.C) has blocked the mergers of hospitals in three separate instances—once in Rockford, IL, once in Toledo, OH and once in Albany, GA.—and the merger of a hospital and large physician group in Idaho. The F.T.C. has claimed these hospitals have broken anti-trust laws. Here are some other points from the article:
- Hospital mergers can result in prices rising by as much as 40% to 50% because of increased bargaining power with insurers and limited competition
- Hospitals claim that their motivation for merging is to better coordinate care in response to mandates by the Affordable Care Act (ACA, Obamacare)
- The F.T.C. believes that care can be coordinated better without hospitals having to merge and that ‘compliance’ with the Affordable Care Act does not allow hospitals to break anti-trust law.
It is unknown if these four blocked healthcare provider mergers will be enough of a deterrent to stop or slow down other provider mergers.
Consolidation is typically a sign of industry distress. When the insurance industry was under pressure in the 1980s and 1990s—there was consolidation. In the pharmaceutical industry with many blockbuster brand name medications coming off patent and becoming generic—there is consolidation. In the airline industry with rising jet fuel prices and fierce competition to lower fares—there is consolidation. When times are good and the money is flowing, companies want to make it on their own. But when times get tight, companies tend to ‘circle the wagons.’
This is just my opinion—and I could be wrong—but this provider consolidation is not bad per se. In many ways, healthcare has been and still is a cottage industry. Healthcare is very complex and the vertical and horizontal integration of healthcare may lead to more effective delivery of those services. Think large, integrated grocery store chain vs. mom-and-pop corner grocery store: more choices, superior selection, better hours, clean, convenient. The key is that consumers still have a choice and they can vote with their feet so that there is not consolidation for the sake of abuse of the customer, but rather to better serve the customer.
The ‘voting-with-your-feet’ part keeps things honest.
Now some people will say, ‘You cannot shop for healthcare. It’s too complicated. The stakes are too high.” I would beg to differ. We shop for things that are complicated with high stakes in other aspects of our lives.
We shop for homes. I don’t know anything about home construction. It’s the largest purchase I will ever make. We shop for accounting services. I don’t know tax law. If it is done incorrectly, I could go to jail. We shop for A/C repairs. I don’t know how an air conditioner works. In Texas in the summer, a non-functioning air conditioner makes your house almost uninhabitable.
So my humble opinion would be that Consolidation + Choice = Better Healthcare.
As in most things, the key is striking the right balance.
To learn how to give employees Choice in healthcare with Compass, click on the 5-min video below.