Sunday, October 05, 2014

Something the MA Attorney General should read

She won't, of course. But maybe the two candidates for Attorney General, John Miller and Maura Healey, will.  Speaking of which, when is some reporter in Massachusetts going to ask them the following questions--and insist on "yes" or "no" as the answers--so we can see where each stands on the major economic and health care issue facing the state:

1) Do you believe the Court should approve the settlement deal offered by the Attorney General with regard to Partners Healthcare System's acquisition of new hospitals?

2) If you are elected on November 4, will you request the incumbent AG to ask for a delay in the Nov. 10 hearing on this matter, to give you a chance to review it and have input before the Court?

Now to the article. Suzanne Delbanco has been a keen observer of healthcare issues for many years.  In this latest column at the Wall Street Journal, she summarizes the adverse impact of industry consolidation.  Excerpts:

Health-care costs are going up, and there's a lot of debate about why. Is it the high cost of drugs or our aging population? Is it Americans' insistence on having the newest, most high-tech care? Each of these may contribute to rising costs. But a close look at the data reveals that one factor is increasing costs in recent years more than anything else: consolidation among hospitals and doctors.

Consolidation means many things, from the merger of two hospitals or health systems to an acquisition of a physician group by a hospital. Generally, however, when providers consolidate, private insurers end up paying more for services. Nationwide, payments to hospitals on behalf of the privately insured are an estimated 3% higher as a result of consolidation, according to a 2012 report by my organization, Catalyst for Payment Reform. That may sound small, but 3% of the almost $900 billion the U.S. spends on hospital care each year is a hefty chunk of change. 

Yet many doctors and hospitals argue that health-care reform, with its emphasis on care coordination, compels them to consolidate. After all, new models under the Affordable Care Act for delivering care, such as accountable-care organizations, require doctors and hospitals to work together to coordinate and improve patient care and reduce spending. Some providers contend that mergers let them achieve economies of scale and improve efficiency, enabling them to decrease costs and improve care. 

There is no evidence to support such claims. For example, when mergers happen in already concentrated markets, price increases can exceed 20%, as 2012 research by the Federal Trade Commission's Martin Gaynor and University of Pennsylvania professor Robert Town showed. The authors also found that "physician-hospital consolidation has not led to either improved quality or reduced costs."

1 comment:

Barry Carol said...

Economies of scale due to hospital consolidation are modest at best just as they are for hotels and apartment complexes. There may be some modest savings in the areas of supplies and advertising and access to capital may improve somewhat. There are likely no savings in labor and benefits which account for roundly 60% of hospital revenue. There are also probably no savings in insurance, maintenance or the cost of oil, gas and electricity. One thing that clearly is enhanced by hospital consolidation is market power.

To mitigate market power, we need disclosure of contract reimbursement rates, more use of reference pricing by insurers and strict limits on how much can be charged for care that must be delivered under emergency conditions for patients who are either uninsured or are treated by an out-of-network provider. It would also be helpful if insurers were free to contract with some hospitals within a system but not all of them including the ability to contract with either MGH or B&W without having to accept both into their network or neither.