Feisty House hear­ing por­tends more bat­tles over con­sol­i­da­tion

Modern Healthcare - - NEWS - By Bob Her­man

Politi­cians and healthcare lead­ers don’t agree on much about the root causes and prob­lems with con­sol­i­da­tion in the healthcare sec­tor. More con­gres­sional hear­ings are likely to in­flame the de­bate.

The House Ju­di­ciary Com­mit­tee’s An­titrust Sub­com­mit­tee held a meet­ing last week on the state of com­pe­ti­tion among hos­pi­tals, doc­tors and in­sur­ance com­pa­nies since the Af­ford­able Care Act’s pas­sage. The ran­corous gath­er­ing built up an­tic­i­pa­tion of a Sept. 22 Se­nate hear­ing—one in which the CEOs of Aetna, An­them, Cigna Corp. and Hu­mana are ex­pected to tes­tify.

But out­side observers don’t fore­see con­gres­sional grand­stand­ing in­flu­enc­ing how the Jus­tice Depart­ment eval­u­ates pend­ing deals. “What the en­force­ment agen­cies do with merg­ers is rarely af­fected by what goes in Congress,” said Lee Si­mowitz, a part­ner at Baker & Hostetler who fo­cuses on an­titrust law. “These are hear­ings where peo­ple are go­ing to use them for their own pur­poses.”

Congress de­cided to ex­am­ine merg­ers and ac­qui­si­tions in the healthcare in­dus­try be­cause of the mas­sive deals an­nounced this sum­mer. An­them is buy­ing ri­val Cigna for $54 bil­lion, while Aetna is ac­quir­ing Medi­care Ad­van­tage pow­er­house Hu­mana for $37 bil­lion.

Healthcare trans­ac­tions were hap­pen­ing well be­fore these deals and well be­fore the ACA went into ef­fect, said Thomas Gre­aney, a law pro­fes­sor at St. Louis Univer­sity, and Dr. Scott Got­tlieb, a fel­low at the con­ser­va­tive Amer­i­can En­ter­prise In­sti­tute. Got­tlieb ar­gued that the ACA has “has­tened” these deals, but Gre­aney said it was wrong to draw a causal re­la­tion­ship. The healthcare re­form law de­pends on new forms of com­pe­ti­tion among providers and in­sur­ers, not mo­nop­o­lies and oli­gop­ol­ies, he said.

Amer­i­can Hos­pi­tal As­so­ci­a­tion CEO Rick Pollack de­fended the trans­ac­tions among his group’s mem­bers. The ACA’s shift to­ward value-based pay­ments and care co­or­di­na­tion is good for the broader de­liv­ery sys­tem, he said, but not all hos­pi­tals can get there alone.

“Many small, stand-alone and ru­ral hos­pi­tals are par­tic­u­larly in need of part­ners,” Pollack said. “The cost of ac­quir­ing and main­tain­ing elec­tronic health records … can tip the fi­nan­cial bal­ance of these or­ga­ni­za­tions.”

In pre­pared tes­ti­mony, Pollack and oth­ers said the pend­ing health in­sur­ance ac­qui­si­tions pose a big­ger threat to con­sumers and healthcare costs. Pollack said the deals “ap­pear mo­ti­vated by top-line prof­its.”

Aetna and An­them have ex­pressed con­fi­dence that the gov­ern­ment will ap­prove their bids, although both com­pa­nies may have to divest some health plans in overly con­cen­trated mar­kets. In­sur­ers have more broadly ar­gued that com­pe­ti­tion among health plans oc­curs lo­cally.

“The bot­tom line is that con­sol­i­da­tion should be looked at on a case-by­case ba­sis,” said Dan Durham, ex­ec­u­tive vice pres­i­dent at Amer­ica’s Health In­sur­ance Plans, the lob­by­ing group for in­sur­ers.

Durham charged that hos­pi­tal con­sol­i­da­tion is driv­ing higher healthcare prices. Pollack fired back that AHIP re­lies on “old” and “in­com­plete” data, not­ing that re­cent hos­pi­tal price growth has been his­tor­i­cally low.

How­ever, a body of re­search shows that hos­pi­tal and health in­surer merg­ers rarely lead to sig­nif­i­cantly lower prices for pa­tients. In­sur­ance merg­ers that try to keep up with the grow­ing size of lo­cal health sys­tems should not be viewed fa­vor­ably by the gov­ern­ment, Gre­aney said. He called this de­fense the “sumo wrestler the­ory” and said it’s a fal­lacy to think dom­i­nant in­sur­ers bar­gain­ing with dom­i­nant hos­pi­tals make the in­dus­try more com­pet­i­tive.

“Some­times we find out that the sumo wrestlers would rather shake hands than com­pete,” Gre­aney said.

Small and mid- size physi­cian prac­tices are of­ten caught in the mid­dle as hos­pi­tals and pay­ers spar over mar­ket share. Dr. Bar­bara McA­neny, a board trustee at the Amer­i­can Med­i­cal As­so­ci­a­tion and a prac­tic­ing on­col­o­gist, said the ACA “pro­vides mean­ing­ful op­por­tu­ni­ties for physi­cians to com­pete and im­prove qual­ity, but it is not yet clear whether con­tin­u­ing bar­ri­ers to mar­ket en­try can be over­come to achieve the un­der­ly­ing goals of the leg­is­la­tion.”

Those bar­ri­ers, such as strict an­titrust pa­ram­e­ters and payer ne­go­ti­a­tion rules for physi­cian prac­tices, have pushed many doc­tors to pur­sue salaried jobs at hos­pi­tals in­stead of run­ning their own in­de­pen­dent prac­tices. “We don’t be­lieve com­pe­ti­tion should force physi­cians to choose em­ploy­ment over self-em­ploy­ment,” McA­neny said.

It’s a fal­lacy to think dom­i­nant in­sur­ers bar­gain­ing with dom­i­nant hos­pi­tals make the in­dus­try more com­pet­i­tive. “Some­times we find out that the sumo wrestlers would rather shake hands than com­pete.”

Thomas Gre­aney, an­titrust ex­pert, St. Louis Univer­sity

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