Friday, September 23, 2011

Hearing on Healthcare Industry Consolidation

On September 9, 2011 the U. S. House Ways and Means Health Subcommittee held a hearing on the consolidation taking place in the healthcare industry. The hearing focused on the impact healthcare consolidation is having on the cost of private health insurance, Medicare spending, and beneficiary costs. The subcommittee's ranking member, Rep. Pete Stark (D-Calif.) Rep. Charles Boustany (R-La.) said "It's refreshing to see our majority raise concerns about competition in the marketplace and how it may result in outcomes that are bad for consumers and for Medicare." Rep. Charles Boustany (R-La.) a cardiovascular surgeon and chairman of the Ways and Means oversight panel, said the healthcare reform law focused too much on getting doctors and hospitals to work together and not enough on the potential downsides.

Chairman Wally Herger (R-CA) called the meeting with the following statement:
Recent years have seen a large number of acquisitions and mergers in the health care industry. Among typical transactions, hospitals are buying or merging with other hospitals, hospitals are purchasing physician practices, physician practices are merging with physician groups, and large insurance companies are purchasing smaller plans. Industry experts expect regulations and policies contained in the new health care overhaul to exacerbate this trend.
While such consolidation may facilitate greater efficiencies and deliver higher quality services by eliminating duplication and excess capacity, many experts are concerned that some consolidations are being driven primarily by a desire to increase reimbursements. Richard Feinstein, director of the Bureau of Competition at the Federal Trade Commission, warned that provider consolidation “can create highly concentrated markets that may harm consumers through higher prices or lower quality care.”

In announcing the hearing, Chairman Herger stated, “While consolidation within the health care industry is not new a phenomenon, all signs point to it accelerating in the coming years. In some circumstances, consolidation produces desirable results like improved efficiency and quality. However, we must ensure that consolidation is not simply used as a tool to increase revenues by driving up Medicare spending and the cost of private health insurance. This hearing will provide members with a better understanding of what is currently taking place, what is expected to occur, and how we can protect America’s seniors and those with private health insurance and the employers who offer it.”

The following witness presented during the hearing:

Martin Gaynor, PhD
Professor, H. John Heinz III School of Public Policy and Management, Carnegie Mellon University

Paul B. Ginsburg, PhD
President, Center for Studying Health System Change

Dianne Kiehl
Executive Director, Business Health Care Group

Michael Guarino
Member, Board of Directors, Ambulatory Surgery Center Association

David Balto
Senior Fellow, Center for American Progress Action Fund

The American Medical Association (AMA) also submitted a statement during the hearing on the topic. The AMA’s statement examined the current state of consolidation in the health care industry, including areas where changes are needed to protect patients and encourage the success of new models of patient care.

“Existing antitrust policies allow significant consolidation in some areas of our health care system while overly restricting the coordination of care by physicians,” said AMA President Peter W. Carmel, M.D. “It is time to update these policies to allow physicians in all practice sizes the ability to lead and participate in innovative new models of care while protecting patients from anticompetitive practices.”

A full 78 percent of office-based physicians in the United States work in practices with nine physicians or less, and a majority of those are in practices of one to four. Under existing antitrust enforcement policies, these physician practices are effectively prohibited from forming clinically integrated groups that can jointly contract with private payers and participate in care improvement and coordination efforts.

Over the last decade AMA studies have consistently found that a wide majority of local health insurance markets across the nation are highly concentrated, which can mean decreased competition and higher prices for patients. The trend of hospitals merging and acquiring physician practices can also lead to reduced competition and an increase in the amount of care patients receive in more costly inpatient settings.

“We applaud the Ways and Means Committee for examining current policies related to consolidation in health care,” Dr. Carmel said. “We will continue to work with them to design policies that encourage the development of innovative, physician-led new models of patient care designed to improve quality, lower costs and promote competitive health care markets.”

The National Association of Chain Drug Stores (NACDS) has asked for scrutiny on the proposed merger of pharmacy benefit managers Express Scripts and Medco and outlined the “problems” it believes would result from the mega-merger in a letter submitted to the committee. NACDS stressed that the anticompetitive nature of this merger ultimately will hurt patients the most, limiting their choice in how and where they obtain their pharmacy services and prescription medications.

“NACDS thanks the Committee for consideration of our comments on healthcare industry consolidation. We are extremely skeptical that the American public can trust a ‘super PBM’ to look out for the best interests of patients and payors, including Medicare Part D, or to pass any purported ‘savings’ along to beneficiaries and other consumers. These concerns are compounded by the fact that the PBM industry as a whole is virtually unregulated,” NACDS concluded in its comments.
Three House Democrats also urged the Federal Trade Commission to closely scrutinize the merger in a letter to FTC Chairman Jon Leibowitz. "The proposed merger would affect hundreds of millions of Americans with private health insurance and have a potentially significant impact on drug cost for government programs," said Reps. Henry Waxman (D., Calif.), Frank Pallone Jr. (D., N.J.) and Diana DeGette (D., Colo.).


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1 comment:

  1. Great discussion around a hard topic. I hate government meddling in things, but there is some cause for concern with the healthcare consolidation. However, I think shortly we'll see the trend of doctors leaving their consolidation since they don't like working for the hospital. That seems to be the previous cycle to me.