Many Americans consider their local hospitals pillars of their communities. Hospitals are often the largest employers in a community, sponsors of little league teams, and deliver generations of children for families. What many may not realize, however, is that this local hospital is likely owned by a large corporation that is manipulating the market to extract more money from the very people they claim to serve.
In a traditional, competitive market, if a hospital’s prices are too high, plans would move better-value providers in-network, meaning the employers are paying for the best care at the lowest cost. However, currently, over three-quarters of hospital markets are considered “highly concentrated,” due to corporate hospital systems merging at unprecedented rates. And it’s only getting worse. From 2022 to 2023, there was an 18 percent rise in the number of mergers according to a report from Kaufman Hall.
As corporate hospital systems enter hostile negotiations with health plans, the balance of power significantly favors hospitals due to mass consolidation. Unfortunately, hospital systems are leveraging this increased market power to raise prices. As a result, businesses have found it increasingly difficult to afford comprehensive health care plans for their employees, which can impact their ability to recruit and retain talented employees.
A recent report from the non-profit think tank Third Way highlights how hospitals have started to dump patients in order to gain leverage with health plans, disrupting patient care. When hospitals negotiate with health plans and providers, if plans don’t accept whatever prices hospitals set, the hospital will move that plan out of network and dump the patients, forcing them to pay for their services out of pocket. This bad faith practice is on the rise across the country, leaving tens of thousands of employers scrambling to provide high-quality care for their employees.
Busting up these consolidated corporate hospital systems and promoting competition in the health care marketplace is one of the best ways to stop this “hostage taking” strategy. The Third Way report suggests that agencies like the Federal Trade Commission (FTC) or the U.S. Department of Justice (DOJ) should be empowered to enforce federal antitrust policies, but they lack the resources. Congress can help by increasing the annual budgets for these agencies, specifically allocating funding to combat consolidation in these hospital markets. Lawmakers can also put an end to the embargo on the FTC’s ability to investigate tax-exempt hospitals. And at the state level, attorneys general should also have authority to address these problems.
A leading metric for market concentrations concluded that from 2002 to 2020, 20 percent of completed mergers were based in anticompetitive practices. During that same time period, the FTC only challenged 13 of these acquisitions, a 1 percent action rate. Around 60 percent of these transactions during that time were legally not required to report to these enforcement agencies.
President Joe Biden signed an executive order in 2021 mandating the FTC and DOJ prioritize investigating hospital and insurance mergers. Some deals were called off, but this is still a growing problem in the United States.
To avoid monopolies and to keep health care costs as low as possible for employers while still delivering high-quality care, we must address this issue. The best way to achieve these low costs for patients is through competition, which currently doesn’t exist in the consolidated hospital marketplace.
Corporate hospital systems are the main winners in the game of consolidation and mergers, and patients and employers are suffering the consequences. Employers cannot afford to continue paying these prices, especially without improvements in care. The FTC and DOJ need more tools in order to challenge these anticompetitive maneuvers and help patients get the care they deserve.
Shawn Gremminger is the President and CEO of National Alliance of Healthcare Purchaser Coalitions (National Alliance), a nonprofit, purchaser-aligned organization whose members represent private and public sector, nonprofit, and union and Taft-Hartley organizations, and more than 45 million Americans, spending over $400 billion annually on healthcare.
Bret Jackson is the president of the non-profit Economic Alliance for Michigan (EAM). EAM is comprised of businesses and unions working together with one clear objective, the continued growth of Michigan’s economy by creating an atmosphere that inspires job growth and maintains competitiveness for attracting new companies and talent. He serves as Chair of the Board of Governors for the National Alliance of Healthcare Purchaser Coalitions.