Citing the agency's own research as fuel for its concerns, a group of lawmakers serving on the Energy and Commerce committee are asking The Medicare Payment Advisory Commission to dig deeper and provide answers on how hospital consolidation is driving higher costs for the Medicare program and its beneficiaries, including prescription drugs.
The letter was signed by the Committee's republican chair, Oregon Senator Greg Walden as well as Health Subcommittee Chair Republican Senator Michael Burgess and Oversight and Investigations subcommittee chair Republican Representative Gregg Harper.
They cited the ever-increasing trend of hospital consolidation, merger and acquisition activity over the last decade and that there is no forecasted slowdown for the trend. A GAO report found that the number of vertically consolidated hospitals jumped 21 percent from 2007 to 2012. And the consolidation of physician groups is included.
Bipartisan concern over whether Medicare policies are actually driving hospital consolidation and impacting Medicare has been long-standing, but conflicting evidence has clouded the waters. Testimony in 2014 before the Committee highlighted the beneficial economies of scale and efficiencies gleaned from mergers and acquisitions while other testimonial highlighted "extensive research evidence" showing that consolidation leads to big price hikes without tandem increases in quality or efficiency, the letter said.
The reality and severity of rising prices varies too, with the lawmakers citing separate reports that showed consolidation could reduce costs by 15-30 percent, while also acknowledging that other reports have indicated consolidation can increase costs by as much as 20 to 40 percent.
Some of MedPAC's own research also fueled lawmaker concerns, with the three Congressman noting that the Medicare Hospital Insurance Trust Fund was most recently projected to run out in 2026, three years earlier than their 2017 report projected. In a June 2017 report to Congress, MedPAC noted that consolidation can increase costs for Medicare and its beneficiaries. What's more, horizontal hospital consolidation can trigger higher commercial prices and broaden the gap between prices paid by Medicare and commercial payers. Physician-hospital consolidation can also spawn higher costs for Medicare and commercial insurers.
The 340B program is yet another area of concern. Lawmakers pointed to a MedPAC report showing that in 2015 more than half of Medicare Part B drug spending in hospital outpatient departments was attributed to participating 340B hospitals. Also, the report said 340B discounts are among the reasons cited by stakeholders for physician interest in selling to hospitals and hospital interest in acquiring physician practices.
"It is imperative the committee receive additional analysis from MedPAC regarding the degree to which current Medicare payment policies may encourage hospital consolidation and may also lead to higher drug spending for the program and patients," Walden, Burgess and Harper wrote.
They asked MedPAC to focus deeper analysis on the following areas: how much current federal policies accelerate consolidation; the implications of consolidation on hospital and patient costs; comparison between markets with high level of consolidation versus markets with low level of consolidation and whether high-consolidation markets result in higher drug and care costs for Medicare beneficiaries; effect of physicians and hospital integration on Medicare payments for physician services; and effect of 340B drug discounts on the price of drugs hospitals purchase.
Twitter: @BethJSanborn
Email the writer: beth.sanborn@himssmedia.com