Reprinted from the NY Times April 9th 2016 – written by Reed Abelson
Federal officials are expected to argue in court starting Monday that a large hospital merger in the Chicago area could hurt consumers and should be stopped. It would be the latest in a series of efforts by regulators to push back against a wave of consolidation among major health care providers.
But a frenzy of smaller transactions is also profoundly changing the landscape, many of which face little regulatory resistance. The deals are often for a couple of doctors here, or a hospital there, making them too small to attract much attention. But as those deals add up, they are creating groups that in some cases dominate local or regional markets. And they are raising questions about whether the gaze of antitrust officials is directed in the right place.
“There’s a lot of consolidation going on at a lot of levels,” said Leemore S. Dafny, a former federal official who is a health economist at Northwestern University. She added, “I don’t think the antitrust laws are set up to stop it.” Doctors and hospitals are making the calculation that bigger is definitely better. Consolidation, they say, helps them better coordinate care and manage patients, making care more effective and less expensive.
Skeptics, however, say that the small combinations can eventually translate into higher costs. By gaining market share, they say, hospitals are able to charge more for their care and gain more influence about where patients are sent for lucrative services. Regulators, meanwhile, are left with limited information about the smaller deals, including answers about whether they diminish competition, leading to higher prices and lower-quality care.
Dr. Farzad Mostashari, a former health official in the Obama administration, describes what is taking place as “creeping consolidation” — being done at a pace that keeps it away from prying eyes. “If you move slowly enough, maybe nobody will notice,” he said.
Many of the smaller deals go unreported, leaving any tally of them incomplete. But at least 940 health care service transactions took place last year, up from about 480 in 2010, according to Irving Levin Associates, a research firm. This mix of deals, which involved groups like physician practices, hospitals and nursing homes, totaled some $175 billion.
Because of the consolidation, patients are more likely to be getting care from providers with formal ties to one another. The doctor who is employed by a hospital, for example, may send a patient for a CT scan at a facility owned by the same hospital. Patients may be discouraged from going to a provider outside a given network, either by their insurer or their doctor.
The combinations taking place include smaller hospital mergers, like one in Arizona in March, when two hospitals merged. The same month, Baptist Health, a small hospital group in Kentucky, said it planned to reach into Indiana to add another hospital. Neither of those deals has generated significant attention.
The difference in regulatory attention is particularly stark in Illinois.
The hospital deal in Chicago, between Advocate Health and NorthShore University HealthSystem, brings together two large systems, including hospitals and doctors’ groups. It was announced in 2014 and involves more than 6,000 doctors. Advocate and NorthShore say they will promise not to raise their prices above inflation. They also say they plan to introduce a health plan that will be cheaper than comparable policies offered by the insurers in the market.
But the deal is being opposed by the Federal Trade Commission in a case expected to start Monday at the United States District Court for Northern Illinois.