When Americans think of modern corporate monopolies, they think almost exclusively about Silicon Valley when, in reality, there is likely one in their backyard. In 70 percent of American metropolitan areas, a single health system dominates the market thanks to federal policies that encourage consolidation.
The Congressional Budget Office estimates that the number of metro areas where healthcare is highly or very highly concentrated shot up seven percent between 2010 and 2017. The pandemic appears to have accelerated that trend, which is why more than 52 percent of doctors in the United States were employed by hospital systems in January 2022, up from 46.9 percent in 2019. Health care is no different than any other industry: once consolidation becomes the norm, these regional monopolies can set prices unchecked by alternative providers. Residents in cities with high health care concentration pay about three times more for care than those living in metros with more competition.
Fortunately, there is a bipartisan effort underway to restore sanity and transparency to the way America pays for healthcare through a major reform package that was introduced in several key committees mid-September. A cornerstone of these reforms would eliminate the higher fees hospital systems charge Medicare for identical services. This principle, known as site neutrality, may sound esoteric, but it could prove the lynchpin for lowering health care costs and preventing monopolies.
Major health systems have captured increased market share and expanded their ranks thanks to perverse incentives baked into health policy. Each year, major health systems receive billions of dollars from taxpayers, employers and insurance companies by tacking on “facility fee” charges for routine care. Facility fees are supposed to compensate for hospital beds and valuable emergency room space, but major health systems apply these charges to outpatient facilities, including those located in the same strip mall medical buildings that house private practitioners.
One needs to look no further than cancer treatments to see the insidious incentives at play when the owner of a facility dictates the price of care. The average cost for a biopsy increases five-fold in a hospital setting. Cancer patients will then pay 60 percent more for chemotherapy at an outpatient center under a hospital umbrella compared to the community private practice operating with identical facilities, equipment and medicine. Federal health policy enforces these disparities: Medicare pays hospital systems nearly three times more than private community practices for identical chemo treatments.
These fee hikes have flooded large health systems with the money they need to buy out private practices at an alarming pace. Taxpayers are already paying the price for this consolidation. The Medicare Payment Advisory Commission found that between 2015 and 2021 chemo treatments at private practices fell by more than 14 percent, while those at hospital outpatient centers skyrocketed by 21 percent. In 2012, hospital departments were responsible for about one-in-three chemo visits billed to Medicare; by 2021, that number had skyrocketed to 52 percent.
Politicians across the spectrum campaign on checking the $4 trillion Americans pay each year in health care costs. The answer lies in transitioning away from a system that charges patients and insurers based on the setting of medical care and instead limits billing to the services rendered. Americans will see immediate benefits from such reforms. Medicare is projected to save at least $150 billion over the next ten years. Those savings will also extend to employers and those covered under private insurance plans. Former Congressional Budget Office official Philip Ellis estimates that insurance premiums would decrease by $117 billion over the same period.
These reforms are not only good policy but good politics. In an age of sharp partisan divisions, a supermajority of Americans support measures to rein excessive costs through site neutrality measures. A March poll found that 85 percent of voters agree that hospital departments should charge the same price for the same services provided by community private practices, while 87 percent say hospital affiliates should publicly disclose their prices. Three in four voters back measures to prevent “hospitals from engaging in business tactics that reduce competition.”
America may be preparing for another fierce campaign season, but Trump supporters (85 percent) and Biden supporters (95 percent) agree that Congress should take action to pass reforms that reduce hospital costs. The surest way to do that is to eliminate the misuse of facility fees and level the playing field for private community practitioners and hospital systems.
Site-neutral reforms will strike a major blow against the descent into consolidation and monopoly in the health care system while saving patients and taxpayers billions in the process. The time to act is now. If Congress does not act to aggressively check the misuse of facility fees, it is only a matter of time before every doctor becomes just another cog in our broken healthcare machine.
Dr. Aamir Hussain is a dermatologist in Northern Virginia, health policy writer and medical educator. He has been interviewed by the New York Times, PBS and Al Jazeera. His writings have been featured in Huffington Post, KevinMD, Religion News Service and other outlets.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller.