In the fourth quarter of the Obama Administration, the nation's chief trade regulators are promising a healthy dose of scrutiny for the continuing waves of healthcare provider mergers and acquisitions.
While many hospital and physician practice mergers and acquisitions have gone forward in the past six years of the Obama Administration, the Federal Trade Commission has tried to draw a line in the sand for protecting competition, and will continue to do so, Edith Ramirez, FTC commissioner and chair, reiterated.
"The current consolidation wave could have substantial consequences for healthcare reform efforts that depend heavily on competition to control costs and improve quality," Ramirez wrote in a New England Journal of Medicine perspective. "Consolidation risks upsetting this competitive dynamic and harming consumers."
Ramirez said the FTC's approach is to intervene when there is "strong evidence" that a merger will "result in market power that will lead to an increase in prices" without "corresponding quality improvements."
Last year, the FTC scored a win for that strategy when a federal appeals court upheld the agency's decision to block the merger of Toledo, Ohio's largest health system, ProMedica with its long-time competitor, St. Luke's Hospital.
"The FTC showed that health plans could obtain more competitive prices from ProMedica when St. Luke's existed as a suitable alternative," Ramirez wrote. "The loss of that alternative would have increased ProMedica's negotiating clout and left health plans vulnerable to ProMedica's price demands."
Likewise, the FTC has taken a stand against hospital systems acquiring physician practices. In Idaho, a federal court sided with the FTC and ordered St. Luke's Health System to unwind its acquisition of the state's largest independent, multi-specialty physician practice, the Saltzer Medical Group.
In those markets, and others, the evidence was highly suggestive that the mergers would lead to higher prices, Ramirez wrote. Indeed, evidence to the contrary, that provider consolidation necessarily improves quality and lowers costs, is generally lacking.
A 2012 Robert Wood Johnson Foundation review of the research found that hospital consolidation typically leads to rising prices -- by as much as 20 percent -- and has little impact on quality.
Those studies largely preceded the Affordable Care Act and the consensus among private payers, providers and federal health officials alike that fee-for-service reimbursement is not sustainable.
But clinical integration and collaboration across providers does not necessarily require financial consolidation, Ramirez argues.
Although the St. Luke's case in Idaho is under the appeal, the federal judge agreed with the FTC that there are other ways short of a merger to clinically integrate and succeed under accountable care models, such as through health information sharing, collaboration on best practices and financial incentives for quality of care.
"For example, according to St. Luke's, a central benefit of the transaction would be the implementation of a shared electronic health records system, but an effort to provide non-affiliated physicians access to its EHR system was already well under way," Ramirez wrote. Also, she noted, a number of physician practices in Idaho, including groups smaller than Saltzer, are already participating in risk-based contracting and integrated care.
In some states, legislation has been proposed to exempt healthcare providers from antitrust review for mergers and joint ventures. This is short-sighted, according to Ramirez.
"At their extreme, these bills would encourage providers to negotiate collectively with health plans in order to extract higher rates, in effect allowing providers to fix their prices," she wrote. "By permitting conduct that would ordinarily violate antitrust laws, the bills would lead to higher prices and lower-quality care -- undercutting the very objectives they aim to achieve. More fundamentally, the proposed legislation betrays a misunderstanding of the crucial role that competition plays in the healthcare sector."
The idea that health systems should compete for patients based on quality and costs is already becoming reality in some parts of the country.