Gobble Gobble: The Insatiable Appetites of Large Health Systems
Mergers and acquisitions play a large role in most industries, and healthcare is no exception. Between April and June of this past year, there were an estimated 14 mergers between health systems (HFMA 2020), and that figure represented a low point in M&A activity for the past four years. More often than not, mergers in healthcare aren’t between small fry, but rather giant hospital systems with billions of dollars in revenue.
The results of frequent deal activity in the industry are startling — in Austin, where Cure is based, three health systems control more than half of the area’s hospitals. Furthermore, individual doctors continue to join health systems at unprecedented rates, with over half of primary care doctors currently employed by a health system, as compared to 40% just four years prior.
Health system executives often argue that hospital consolidation will drop healthcare costs and even accelerate the development of new medicine and treatment techniques. This is rarely, if ever, the case. Large health systems often abuse their unprecedented levels of monopolistic power to raise prices across all points of care. A 2015 study by the FTC concluded that hospitals raise prices by as much as 50% after mergers, even when adjusting for general time trends. Do you smell an antitrust case?
Moreover, the claim that mergers boost the quality of healthcare is hardly proven. For instance, a Harvard study from earlier this year demonstrated that patient experiences at a hospital deteriorated after a merger while mortality rates did not improve (Beaulieu et al. 2020). Intuitively, this result makes sense: if doctors are mired in the sprawling webs of bureaucracy at a large health system, they have less time and energy to focus on patients.
While there may be exceptions, mergers between hospitals generally do not benefit patients or doctors. Instead, hospitals often use their market power to raise prices and line the pockets of executives and shareholders.
Further Reading:
https://www.hfma.org/topics/news/2020/08/more-hospital-consolidation-is-expected-post-pandemic.html
https://www.healthaffairs.org/doi/10.1377/hlthaff.2020.00017
