House Subcommittee Takes Dim View of Healthcare Consolidation

Lawmakers and witnesses alike cited the ill-effects of hospital mergers and acquisitions in a long list of industry behavior they find troubling.

A hearing of the House Judiciary Committee's antitrust subcommittee would not have been a comfortable place Thursday for any healthcare executive touting the benefits of a planned merger or acquisition.

Lawmakers and witnesses took turns criticizing rampant consolidation among hospitals and other healthcare companies. While the public is often told these deals will lead to improved efficiency and higher quality care, those purported benefits frequently fail to materialize, they said.

Since the hearing grouped payer and provider consolidation with anticompetitive concerns about the pharmaceutical industry—an area that both major parties have expressed interest in addressing through congressional action—the discussion could signal how lawmakers will approach any legislation to address the problems they perceive.

Rep. Doug Collins, a Republican from Georgia and the committee's ranking member, said hospital consolidation has had an especially detrimental impact on rural communities in his state.

"These communities often already have few options for quality care, so as hospital consolidation has increased over the past 10 years, rural communities like my own have been hurt the most," Collins said.

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"At times, these mergers and acquisitions can help rural communities by keeping facilities open, but often they result in full or partial closures and shifting patients from nearby facilities to those hours away," he added.

Some problems caused by consolidation, such as increased travel times for emergency services, can "literally mean the difference in life and death," Collins said.

Jerry Nadler, a Democrat from New York and the committee's chairman, said there's no question that the recent spate of mergers has contributed to the industry's problems.

"It is well documented that hospital mergers can lead to higher prices and lower quality of care," Nadler said.

Martin Gaynor, PhD, an economics and health policy professor at Carnegie Mellon University and a founder of the Health Care Cost Institute, said in his testimony that there have been nearly 1,600 hospital mergers in the past 20 years, leading most regions to be dominated by one large health system apiece.

"This massive consolidation in healthcare has not delivered for Americans. It has not given us better care or enhanced efficiency," Gaynor said. "On the contrary, extensive research evidence shows us that consolidation between close competitors results in higher prices, and patient quality of care suffers for lack of competition."

Since hospitals that have fewer competitors can better negotiate favorable payment terms, this consolidated landscape "poses a serious challenge for payment reform," he added.

"Our healthcare system is based on markets. That system is only going to work as well as the markets that underpin it," Gaynor said. "Unfortunately, these markets do not function as well as they could or should."

Gaynor recommended several possible policy changes, including an end to policies that make it harder for new competitors to enter a market and compete and an expanded authority for the Federal Trade Commission to review potentially anticompetitive conduct by nonprofit entities. He also said lawmakers should consider imposing FTC reporting requirements for even small transactions to enhance the tracking capabilities of enforcement agencies.

To support his claims, in his written testimony, Gaynor pointed to research he completed with Farzad Mostashari of Aledade Inc. and Paul B. Ginsburg of The Brookings Institution.