Feds’ tab for insurance subsidies may boost scrutiny of provider competition
Some health policy experts are growing concerned that the FTC lacks the resources and political support it needs to effectively police the surge of consolidation among hospitals, systems and physician practices.
With a string of comeback wins, the Federal Trade Commission has proved it’s still capable of foiling healthcare consolidation it deems out of bounds—even though most of the deals it fights these days are wrapped in the flag of reform.
A federal appeals court handed the FTC a big victory Oct. 31 when it revived its effort to challenge a proposed merger of Advocate Health Care and North Shore University Health System in Chicago’s northern suburbs.
Also last month the agency won its appeal to temporarily block the union of Penn State Hershey (Pa.) Medical Center with Pinnacle Health System, which prompted them to abandon their plans.
The FTC is responsible for monitoring deals among healthcare providers and challenging ones it thinks will raise costs and diminish quality of care. The Affordable Care Act has encouraged providers to clinically integrate, and many have pursued mergers under that banner.
“There is no doubt the ACA has made healthcare more complex, and a lot of organizations are using that as an excuse to merge,” said Dr. Ashish Jha, a professor of health policy at the Harvard School of Public Health.
At the same time, the healthcare law has placed more pressure on the federal government to stop anticompetitive mergers because it now subsidizes premiums for private health plans in the ACA marketplaces, Jha wrote recently in JAMA Forum. He argues that policymakers have yet to appreciate how much the law relies on competitive markets to keep prices stable.
In March, the Congressional Budget Office projected premium tax credits for 2017 would total $43 billion, up 34% from 2016. But that was before premiums were announced for 2017, with average premiums increasing 25%.
Some health policy experts are growing concerned that the FTC lacks the resources and political support it needs to effectively police the surge of consolidation among hospitals, systems and physician practices.
For its 2017 budget, the FTC requested 19 more full-time employees in its competition divisions, which would increase that workforce to 573.
The antitrust challenges pursued by the FTC represent a “tiny percentage” of all mergers in the healthcare sector, said Tim Greaney, co-director of the Center for Health Law Studies at St. Louis University.
The cases are strategically chosen to deliver precedent-setting wins that could deter other providers from pursuing similar mergers, Greaney said.
The FTC has “nowhere near the resources to challenge every merger they believe would be problematic,” said Paul Ginsburg, director of the Center for Health Policy at the Brookings Institution.
So far, the FTC has focused exclusively on preventing horizontal merg- ers, or consolidations of two healthcare organizations that share the same geographic market, Ginsburg said. The FTC has developed a wellresearched argument that shows if a provider dominates the geographic market of a region, healthcare costs rise and quality of care is diminished.
But the FTC has been less active in addressing the anti-competitive impacts of vertical mergers, which have increased 86% in the last three years, according to a recent analysis.
The limited research conducted so far on how the ownership trend affects the quality and cost of care has yielded mixed results.
The Medicare Payment Advisory Commission is considering how Medicare might blunt the incentives for such consolidation, which was a topic of discussion at a MedPAC meeting last week. One of MedPAC’s solutions has been to take aim at the higher payments hospital-owned facilities receive for the same services delivered in other settings.
The FTC also has yet to dig into mergers that cross geographic markets, which have been on the rise and have the potential to drive up costs, Ginsburg said. Those challenges are likely to come when there’s more robust literature on the effects of such deals, he said.
In the meantime, states are beginning to take action to control healthcare prices, said Nicholas Bagley, a law professor at the University of Michigan. For example, California recently passed a bill to protect consumers from surprise out-of-network medical bills.
But Bagley argues most hospital markets are already consolidated and there is no national outcry from politicians and their constituents to dismantle large, integrated health systems.
“We don’t talk about the rising tide of big hospital systems because it happens at the state level,” Bagley said. “It flies under the radar of national health policy types, who are paying attention to national issues surrounding the ACA.”