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June 18, 2020
Countering the Negative Consequences of COVID-Induced Healthcare Consolidation
David Burda
COVID-19 Economics Policy System Dynamics

Countering the Negative Consequences of COVID-Induced Healthcare Consolidation

The COVID-19 outbreak in the U.S. is leaving a lot of financially struggling hospitals and medical practices in its wake. Experts predict that to recover—or perhaps as an opportunity to grow market share—many of the affected hospitals and practices will consolidate with other hospitals and practices. 

And we all know what happens after that. Prices for hospital care and physicians services go up.

With that coronavirus-consolidation-cost scenario in mind, seven researchers with the Petris Center on Health Care Markets and Consumer Welfare in the School of Public Health at the University of California at Berkeley put together a 41-page playbook states can follow to make sure that providers and payers don’t stick patients with arbitrarily higher medical bills when all this is over.

You can download the report, Preventing Anticompetitive Healthcare Consolidation: Lessons from Five States, here

“The coronavirus pandemic is placing additional financial strain on many physician practices and small, rural hospitals, elevating the risk of unchecked consolidation,” the researcher said in a press statement announcing the release of the report. “State governments can play a critical role in improving oversight of anticompetitive mergers and other affiliations, especially at this time.”

That responsibility falls to states because federal healthcare antitrust enforcement by the Federal Trade Commission and U.S. Justice Department has been weak, leading to many highly concentrated (read few competitors with little competition) healthcare markets across the country and across industry sectors, the researchers said. 

For example, the researchers found that:

  • 94.8 percent of metropolitan statistical areas have highly concentrated hospital markets
  • 77.5 percent of MSAs have highly concentrated medical specialist markets
  • 58.1 percent of MSAs have highly concentrated commercial health insurance markets
  • 41.2 percent of MSAs have highly concentrated primary-care physician markets

The researchers looked at all 50 states to see how they’re handling or not handling the situation, and they honed in on five states that they felt are demonstrating the “best practices” for state healthcare antitrust enforcement. The five states are: California, Connecticut, Massachusetts, Pennsylvania and Rhode Island. 

What each of the five states do to one degree or another, according to the report, are the following five best practices to oversee healthcare market concentration in their states: 

  • Pre-transaction notice: Require pre-transaction notice of all proposed deals in addition to waiting periods and processes requiring the submission of economic and financial information about the proposed transaction
  • Pre-transaction review: Use a multi-agency healthcare transaction approval process for all healthcare transactions, including all mergers, joint ventures and affiliations, that would result in a material change in control or ownership
  • Pre-transaction approval: Set specific criteria for the healthcare transaction review process, such as the deal’s effect on markets, prices, quality and access that state attorneys general and administrative agencies can use to evaluate and approve a proposed transaction
  • Conditional approvals and consent decrees: Enable state attorneys general and state agencies, as part of the approval process, to condition approvals on specified terms and negotiate consent decrees to mitigate potential harm to markets and the public from the transaction
  • Post-transaction monitoring: Implement active post-transaction monitoring of all conditioned approvals and consent decrees, as well as regularly review the market effects of other consolidations not subject to conditional approvals

“States are well positioned to evaluate proposed consolidation transactions and take action to avoid potential harms to the public and healthcare markets,” the researchers said. “During this time of crisis, state policymakers should consider expanding the tools antitrust enforcers have to effectively review proposed and oversee consummated transactions to verify that any consolidation benefits the public and does not result in rampant price increases.”

Man, this COVID-19 is one powerful virus. 

On one hand, it’s killing off a lot of unnecessary state and federal rules and regulations that stood in the way of innovative care delivery models that payers and providers are using now to battle the pandemic. On the other hand, it could spawn even more state and federal rules and regulations to prevent payers and providers from using the outbreak as an excuse to pursue anticompetitive business deals.

An effective vaccine can’t some soon enough for everyone.

If you’d like to learn more on this topic, please read “How the COVID-19 Pandemic is Dulling the Point of All Those Healthcare Regulations and “This is a Story About Where Healthcare Regulations Come Fromon 4sighthealth.com.

Thanks for reading.

Stay home, stay safe, stay alive.

About the Author

David Burda

David Burda began covering healthcare in 1983 and hasn’t stopped since. Dave writes this monthly column “Burda on Healthcare,” contributes weekly blog posts, manages our weekly newsletter 4sight Friday, and hosts our weekly Roundup podcast. Dave believes that healthcare is a business like any other business, and customers — patients — are king. If you do what’s right for patients, good business results will follow.

Dave’s personnel experiences with the healthcare system both as a patient and family caregiver have shaped his point of view. It’s also been shaped by covering the industry for 40 years as a reporter and editor. He worked at Modern Healthcare for 25 years, the last 11 as editor.

Prior to Modern Healthcare, he did stints at the American Medical Record Association (now AHIMA) and the American Hospital Association. After Modern Healthcare, he wrote a monthly column for Twin Cities Business explaining healthcare trends to a business audience, and he developed and executed content marketing plans for leading healthcare corporations as the editorial director for healthcare strategies at MSP Communications.

When he’s not reading and writing about healthcare, Dave spends his time riding the trails of DuPage County, IL, on his bike, tending his vegetable garden and daydreaming about being a lobster fisherman in Maine. He lives in Wheaton, IL, with his lovely wife of 40 years and his three children, none of whom want to be journalists or lobster fishermen.

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