Healthcare consolidation has economically beaten down most communities across the United States, driving up the price of health care services.
When the nation’s largest hospital operator, HCA Healthcare, acquired western North Carolina’s Mission Health System in 2019, few in Asheville expected their daily lives would be impacted. Not only did HCA acquire the region’s seven largest hospitals, but it snapped up 124 physician practices too. By the end of the merger this single health system controlled 90 percent of the hospital market, as well as significant portions of primary and specialty care.
In any other industry, such monopolistic practices would sound the alarm of regulatory watchtowers, but when it comes to healthcare the federal government actively subsidizes and enables the barbarians at the gate.
Increased healthcare consolidation was disastrous for residents of western North Carolina. HCA made staff cuts that resulted in the hospitals being understaffed with long wait times. North Carolina Attorney General Josh Stein recently reprimanded Mission Hospital for providing inadequate cancer care, noting that “HCA failed to provide adequate staffing and resources.” A local newspaper reported that “complaints of declining patient care and safety began soon after HCA took over.” Supply was restricted with the closure of multiple primary care practices, leaving patients with fewer options. At the same time, HCA raised its prices in both areas.
Across the United States vulnerable patients in thousands of jurisdictions have faced the devastating consequences of consolidation. As hospitals and health systems consolidate in-patient and out-patient care, study after study has shown that patients face higher prices and fewer options. As consolidation tramples communities, patients can be left with no nearby alternatives to a health system monopoly. Poor government policies are driving this vicious cycle of rising prices, and it is imperative that Congress take action to end it.
Americans would expect the federal government to be on high alert against monopolies, but instead, their healthcare reimbursement policies explicitly reward them.
Medicare sets prices for certain services. From administering drugs to patients to conducting imaging or performing surgery, Medicare has a schedule from which it pays physician providers and hospitals. Medicare makes up 21 percent of American healthcare expenditures, so its payment schedule holds significance in the national marketplace.
One component of Medicare’s payment system is the site-of-care payment. It matters whether a medical service takes place at a hospital or at a physician practice, with the former receiving a higher reimbursement payment. More recently, hospitals have been taking advantage of this fact, and started buying physician practices and identifying them as part of the hospitals’ outpatient departments. Despite the fact that newly hospital-owned medical practices can be in the same location and providing the same services, Medicare pays them more. This encourages more consolidation and has led to new monopolist health systems that raise prices for everyone.
During this time, hospital revenue growth has outpaced the growth in expenses. Today, the largest for-profit health systems, like HCA, are doing better financially than before the pandemic. Researchers in California report that “COVID-19 relief funding aided in hospital net operating margins reaching all-time highs.” The North Carolina treasurer found that hospital systems in the state saw $5.2 billion in net profit last year with billions more in cash and investments.
The consolidated health systems are thriving, but patients are being underserved and overcharged.
This is why the House overwhelmingly passed the Lower Costs, More Transparency Act, which would take a first step toward reducing the monopoly privileges Medicare bestows on consolidated health systems and expose exorbitantly high prices to help consumers compare options.
The bill combats consolidation by requiring Medicare to give the same reimbursement for drugs administered, regardless of whether they’re administered at a hospital out-patient department or at an independent physician practice. Same service, same reimbursement.
This is a great first step. But Congress should also take up policies to make Medicare payments for all out-patient services site-neutral — that is, the payment should depend on the service and not the location or the owner of the practice.
Transparency rules have been bandied about since the Affordable Care Act, but Obamacare’s transparency rules were lenient and the information they elicited was not useful. That’s why both the Trump and Biden administrations have used executive orders to seek better disclosures from hospitals. This bill would go further and provide consumers with critical information, including publication of cash prices for patients without insurance and the minimum and maximum insurer-negotiated rates for testing, imaging, and ambulatory surgical centers, as well as standard charges for 300 specific “shoppable services.”
The Senate and President Biden should support patients by quickly passing and signing the bipartisan transparency package passed by the House. It is possible to put an end to the government policies that drive up the cost of healthcare, and there is no better time than the present.
Marion Mass, M.D. is a practicing pediatrician, co-founder of Practicing Physicians of America and leadership in Free2Care.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller.