Hospital monopoly: changing the game

To me, the term “monopoly” brings to mind companies like Standard Oil, AT&T, Meta, and the ubiquitous Amazon. So when the the wall street journal published an article about a billionaire who funds a “battle against hospital monopolies”, I was intrigued.

The billionaire is John Arnold, an energy trader at Enron Corporation before his demise in 2001, who gained notoriety when he walked away seven figures richer and without formal office. Arnold and his wife formed a philanthropic organization (Arnold Ventures [AV]) who has influenced policy on a wide range of issues through financial rewards totaling more than $2.5 billion annually.

Since turning to the health industry a decade ago, AV has provided more than $358 million in grants with the goal of disrupting the status quo and reshaping health policy at the community level. the state. The pharmaceutical industry has been a prime target; awards have supported surveys of drug quality, pricing and innovation.

AV has also funded several grants to study hospital consolidation, particularly complaints from employers and consumers that some dominant hospital systems have impeded competition and illegally inflated prices. Today, major funding from AV is supporting the work of Fairmark Partners LLC, a law firm handling private cases against hospital systems. Audiovisual support would be key to Fairmark’s targeted effort to “…reshape hospital markets through the courts.”

For example, one lawsuit alleged that a national hospital chain’s acquisition of a 6-hospital system in western North Carolina gave the chain leverage to raise prices in its overseas markets. inside and outside the state. One of its hospitals reportedly charged four times the state average for a routine procedure due to the chain’s outsized market power and uncompetitive marketing tactics. The court will decide whether the antitrust laws have been violated.

Because of their potential for harm (eg, limiting consumer choice, raising prices, compromising quality), hospital monopolies raise legitimate concerns. Clearly, alleged violations of industry laws and regulations must be investigated and resolved through legal means. But are hospital mergers inherently bad for consumers?

Hospital consolidation has accelerated in the United States over the past decade as national health care reforms shifted reimbursement models from fee-for-service (paying for volume) to care value-based (paying for quality results). In theory, economies of scale help reduce waste and unnecessary duplication of services, improve communication and reporting through centralized electronic medical records, standardize clinical care processes, and facilitate collaboration and coordination of care, which would improve patient outcomes while reducing overall costs.

Does it work? Like most silver bullets, the evidence is mixed and analyzes are hampered by the inability to account for a wide range of variables. Numerous studies show that mergers tend to be associated with higher costs for patients with commercial insurance. A 2020 study (246 acquired hospitals and 1,986 control hospitals) found that acquisition was associated with a small differential decline in hospital performance on measures of patient experience, with no significant differential change in rates of readmission at 30 days. On the positive side, another study found that acquired hospitals had significant incremental improvement in performance on clinical process measures.

Living in the Philadelphia area and based in one of its most established health systems, I remain optimistic that over the long term, many large nonprofit consolidated hospital systems like Jefferson will succeed in meeting expectations. in terms of quality and cost. In the meantime, I hope AV uses its considerable financial clout to make sure everyone sticks to the rules.

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