CEO, Atlas Surgical Group, one of the largest private ASC groups in the U.S., Author of “Success in Ambulatory Surgery Centers.”
Former associate justice Louis Brandeis once warned of “the spiritual and political costs of economic concentration.”
The healthcare industry plays a vital role in society, ensuring the well-being of individuals and communities. However, I see the growing trend of hospital mergers raising concerns about the violation of antitrust laws, the suppression of small businesses and the decline of the private practice model of healthcare. Through this trend’s impact on areas such as insurance premiums, healthcare costs for employees and overall financial stability, I believe that this a topic that should concern all business leaders, not only those in the industry.
Violation Of Antitrust Laws
Hospital mergers often give rise to serious antitrust concerns. These consolidations can reduce competition within a given market, leading to monopolistic practices. According to one study, hospital affiliations with larger healthcare systems have risen to over 70% over the past two decades, contributing to higher healthcare costs and decreased patient choice.
A report by the University of California Berkeley Center for Labor Research and Education revealed that 90% of metropolitan areas in the United States lack sufficient competition among hospitals, resulting in inflated medical service prices. Moreover, a study published in JAMA Internal Medicine found that prices for inpatient care were 17% higher in highly consolidated hospital markets compared to less consolidated ones.
Suppression Of Small Businesses
Hospital mergers tend to exert immense clout, enabling them to suppress small businesses, including private practice doctors. As hospitals expand their reach, they often acquire physician practices, forcing doctors to align with the merged entity or risk losing patients and resources. I believe that this acquisition process threatens to disrupt the private practice model and stifle competition and innovation in healthcare delivery.
The American Medical Association (AMA) reported that hospital acquisitions of physician practices have accelerated in recent years. Between 2012 and 2018, private practices dropped to less than 50% of physicians, leaving fewer independent practices. A Physicians Advocacy Institute (PAI) survey found that in 2021, nearly 70% of physicians in the United States were employed by hospitals or health systems.
Impact On The Private Practice Model
I believe that hospital mergers overall pose a significant threat to the private practice model of healthcare, which is known for its personalized care and strong patient-physician relationships. Hospitals’ absorption of private practices can disrupt the continuity of care and diminish patient choice. In fact, a study that appeared in Health Affairs casts doubt on claims that high-priced providers (often associated with consolidated practices) offer care that is significantly more valuable and showed an overall weak association between practice fees and the effectiveness and quality of care.
The decline of the private practice model has far-reaching implications for both patients and physicians. With consolidation, there are concerns about increased administrative burdens and limited autonomy in decision making.
Hospital Power And Financial Impact
Statistics reveal the extent of hospital power and the financial impact on patients. A report by the National Institute for Health Care Reform showed that hospitals with higher market concentration charged, on average, 12% higher prices for inpatient care compared to hospitals in less concentrated markets. This pricing power affects patients directly, leading to increased healthcare costs and higher insurance premiums.
There are many cases of people who, despite having insurance, are billed exorbitantly, which I and others attribute greatly to this trend of consolidation. While touted as a boost to patient care, this can limit patient choice and reduce competition, allowing hospitals to exert more control over pricing and negotiations with insurance companies.
Strategies For Businesses Amidst Hospital Mergers
I predict that the failure to address and mitigate the practices resulting from hospital mergers will have severe repercussions. Without legislative intervention, private doctors may face substantial losses, including diminished autonomy, decreased patient choice and financial instability. Simultaneously, others are likely to experience adverse consequences such as limited access to diverse healthcare options, increased healthcare costs and reduced quality of care.
What is the implication of all this for the small business? Healthcare follows the same principles of economics that the rest of the world does. Benefits trickle down to the end users, and adversity finds its way to them as well. When Goliath marries Goliath, David loses whatever chance he has at winning.
Larger systems mean stronger bargaining powers for hospitals. That translates into larger insurance payouts to them and higher premiums for a business. These facts in no form should demonize the healthcare entities. They are running a business, after all. The question is, what should small businesses do to protect themselves in the face of these rising costs?
A smart initial step for businesses is to offer comprehensive health plans and promote wellness and screening in your employees. A penny spent in prevention is a dollar saved in treatment. Healthier consumers mean savings on high hospital costs and medical interventions.
Other steps to take would be to move healthcare to outpatient centers and entities. Not only can this lead to lower costs for treatment, but it can also translate into lower premiums down the road. I believe that businesses should also aggressively negotiate with healthcare systems to procure favorable rates for medical services, ensuring that employees receive quality care without the burden of excessive pricing.
Lastly, stay vigilant. If we don’t monitor the trends in our healthcare costs, be it for a screening test or for a hospital visit, we will not be able to act preemptively if there are forces at play beyond what we see.
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