With 2023 bringing divided government and inflation at levels not seen in decades, lowering the cost of health care is a political and moral necessity. Over the years, Americans have found that insurance coverage alone does not equal access, and that despite near universal health insurance coverage, according to the U.S. Census Bureau more than one in five Americans still struggle to pay for their health care. To be treated, patients must be able to afford the care that they need.
Half of the nation’s health care expenditures are spent on care delivered in hospitals and clinics, both markets suffering from the ills of monopoly. In a newly released paper, we lay out pragmatic solutions for tackling hospital monopoly power, with an aim to lower costs for patients.
Last year, Sens. Mike Lee (R-Utah) and Amy Klobuchar (D-Minn.) held a hearing on hospital consolidation, highlighting the rare issue uniting both Democrats and Republicans in today’s fractious political environment. According to the Kaiser Family Foundation, hospital market power has now reached a critical level with 90 percent of metropolitan statistical areas considered highly concentrated for hospital care, and hospitals driving even more consolidation by buying physician practices. Monopoly is the natural product of over 1,500 mergers over 20 years and pro-consolidation federal policy.
Research clearly demonstrates the ills of monopoly — hospital consolidation leads to higher insurance premiums, higher prices for hospital services and higher consumer cost-sharing, all while generating reductions in patient experience. Patients know what this means: big bills that arrive months or even a year after they receive treatment.
Refreshingly, Congress is ahead of us with practical proposals to support competition in care delivery for the benefit of patients and physicians alike.
Unfortunately, at the same time, health systems have become more creative — and not in how they deliver care to patients. Dominant systems today include so-called “anti-steering” or “anti-tiering” contract clauses preventing health plans from directing patients to other low-cost, high-quality physicians; a 2018 case brought by the Department of Justice Antitrust Division against Atrium Health highlighted this practice. To identify the prevalence of these practices, policymakers should direct the Federal Trade Commission and Department of Justice Antitrust Division to study these practices and endow the Federal Trade Commission with the authority to address hospital anti-competitive behaviors such as these.
In addition, researchers and antitrust agencies should be empowered to focus on target areas needing federal competition enforcement through the regular publication and dissemination of a State Competition Index. A State Competition Index would include data regarding mergers, licensing requirements, and concentration across service markets in addition to making source data transparent.
While medical procedures often can be performed safely and completed in an outpatient setting at less cost and inconvenience to the patient, government regulations frequently mandate that the procedures be provided only in an inpatient setting, thus enhancing incumbent hospital market dominance. Preventing this needless interference in medical decision-making, Congress can prevent regulatory agencies from specifying the site of service, and allow patients and physicians to immediately benefit from medical advances and decide when, where and how care should be delivered.
Finally, Congress can promote the growth of new small businesses. In 2010, as part of the negotiations regarding passage of the Affordable Care Act, the hospital industry convinced Congress to enact a ban preventing new physician-owned hospitals from participating in Medicare. Acknowledged by the CEO of the Federation of American Hospitals in a 2021 Advisory Board interview, this was a pivotal and publicly proclaimed victory banning hospital industry competitors.
The ban on new facilities participating in Medicare — which can represent up to a third of a hospital’s revenue — took away the possibility of hospital ownership from physicians, that is, those with the most knowledge of patient care. With recent research demonstrating that physician-owned hospitals can improve quality and lower costs, policymakers should support bills in the House and Senate to correct this error.
With hospital monopolies gouging Americans, now is the time for reasonable reforms to promote choice and competition. It’s our profession’s prescription for a better system for all.
Brian J. Miller, MD, MBA, MPH is an assistant professor of medicine and business (courtesy) at the Johns Hopkins University and a nonresident fellow at the American Enterprise Institute.
Jesse M. Ehrenfeld, MD, MPH is the senior associate dean of the Medical College of Wisconsin and the president-elect of the American Medical Association.
The views expressed here are the authors’ own and do not necessarily reflect those of their employers.