Congress Examines Healthcare Competition, Consolidation

Before a panel of lawmakers, lobbyists for hospitals, doctors, and insurance companies justified consolidation in their markets while blaming others for stifling competition.

A U.S. House subcommittee heard payers and providers offer their views on competition and consolidation of the healthcare marketplace under the Patient Protection and Affordable Care Act Thursday.

For the most part, lobbyists for hospitals, doctors, and insurance companies spent their morning before the Subcommittee on Regulatory Reform, Commercial and Antitrust Law defending their turf, trumpeting cost-savings innovations by their members, and justifying consolidations in their markets while blaming others for stifling competition.

American Medical Association board member Barbara L. McAneny, MD, told the subcommittee that the federal government should more closely examine consolidations in the health insurance and hospital sectors.

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"Given the present structure of the health insurance market, health insurers have the ability unilaterally or through coordinated interaction to exercise market power by raising premiums, reducing service, or stifling innovation," McAneny said. "Accordingly, health insurer markets require more, not less, competition and mergers must be carefully scrutinized."

McAneny said that many hospital markets already are highly concentrated and non-competitive and that further acquisition could "undermine the ability of physicians on behalf of patients to shop for hospitals based upon quality factors."

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"Too much consolidation reduces the incentive of hospitals to compete on these factors, allowing the merged hospital in a concentrated market to provide potentially sub-optimal care for patients," she told the committee.

"A hospital acquiring market power through merger may also substantially lessen the practice options open to physicians such that the hospital obtains market power as an acquirer of physician services."

Rick Pollack, president and CEO of the American Hospital Association, told the subcommittee that hospitals are adapting to a rapidly changing landscape that is moving toward value-based care and reimbursement models.

"To better serve their communities, hospitals and health systems are integrating with other providers in a variety of ways to ensure more coordinated and patient-centered care and improve efficiency and reduce costs," Pollack said.

"Hospitals are making progress in all of these areas despite operating in an environment that has enormous capital and regulatory demands and payments linked increasingly to achieving high performance. Meeting these demands often requires significant restructuring for hospitals, all of which has taken place during a period of historically low levels of hospital price growth."

"On the other hand," Pollack said, "the recently announced commercial insurance deals will not benefit consumers. Instead, they will lead to further consolidation of an already highly concentrated health insurance market, fewer choices for consumers for commercial insurance and MA plans, and higher premiums and/or out-of-pocket costs."

AHIP's Stance

Not surprisingly, Dan Durham, executive vice president, strategic initiatives, at America's Health Insurance Plans, did not agree with Pollack's assessment.

"Provider-related costs are a significant portion of total medical costs, and the growth in such costs has had a critical, and detrimental, effect on consumers," Durham said. "Consumers benefit when healthcare providers compete to offer them lower costs, higher quality services, and innovative approaches to delivering care."

"There are situations in which provider consolidation does not impede these benefits or may even enhance them. In other situations, however, consolidation diminishes competition among providers and leaves consumers with higher costs, diminished quality, and a reduced prospect of innovation or improvement."

Thursday's testimony was heard before a subcommittee thick with partisan acrimony.

Subcommittee Chairman Tom Marino, (R-PA), who has voted repeatedly to repeal Obamacare, said that Thursday's hearing was the first in a series that would examine PPACA's effect on competition and cost in the healthcare marketplace. He made his position clear before testimony was heard.

"There is no doubt that there has been significant movement in each of the hospital, insurer, and physician markets since the enactment of Obamacare," Marino said in opening remarks. "I have infinitely more confidence in the judgment of a competitive marketplace over the judgment of government. Obamacare is another government experiment of attempting to replace the will of the market with its own, an experiment that in my view has gone horribly wrong."

Subcommittee ranking member Hank Johnson, (D-GA), said in his opening statements that the PPACA has expanded coverage to 16.4 million uninsured people, dropping the uninsured rate by 35% while lowering the cost of care. He stated that consolidation in the healthcare sector had been well underway before PPACA went into effect.

"It's clear that now we have put it to work, the Affordable Care Act is saving lives and money," Johnson said. "Rather than demonizing an administration that has done so much for so many, we should be ensuring that the progress we've made in such a short time is not jeopardized by anti-competitive behavior or consolidation."