Exploring the Market Competition Ecosystem: Lessons Learned and Next Steps

October 19, 2022

Over the last few decades, horizontal and vertical consolidation within health care markets has become a pressing issue – with competing market forces driving this dynamic. Horizontal consolidation occurs when two providers performing similar functions merge – such as when two hospitals merge or groups of physician practices merge to form larger group practices. For example, from 2010 through 2014, 451 hospital mergers were completed in the United States, an average of 90 a year; and from 2015 to 2019, the number rose to 511, a rate of 102 a year. Vertical consolidation refers to one type of entity purchasing another in the supply chain such as hospitals acquiring physician practices. For example, a three-year study (2013-2016) found that vertical consolidation negatively affects physician referrals and spending for high-volume Medicare services – which triggered an increase in Medicare spending of $73.1 million.

Likewise, while there is some bipartisan agreement on site-neutral payment policies and curbing anti-competitive practices in health care, it has been challenging to meaningfully address these dynamics. Additionally, evidence suggests that physician practice consolidation, insurance market consolidation, and pharmaceutical consolidation continues to impact patients in terms of costs and access to care. This event 1) discussed past and current trends in market consolidation ecosystem; 2) explored current legislative and administrative policy levers; and 3) identified lessons learned at the state and federal levels


  • Erin Fuse Brown, J.D., MPH, Catherine C. Henson Professor, Director, Center for Law, Health & Society, Georgia State University College of Law
  • Katie Gudiksen, Ph.D., Executive Editor, The Source on Healthcare Price and Competition, U.C. Hastings College of the Law
  • Kenneth Kaufman, MBA, Managing Director and Chair, Kaufman Hall
  • Brian J. Miller, M.D., MBA, MPH, Nonresident Fellow, American Enterprise Institute; Assistant Professor of Medicine, John Hopkins Medicine
  • Christopher Wheeler, J.D., Partner, Farella Braun + Martel
  • Thomas Greaney, J.D., Visiting Professor of Law, UC Hastings Law (moderator)

This event was made possible with support from Arnold Ventures.

Presentation: Exploring the Market System Ecosystem: Lessons Learned and Next Steps

Event Resources

Key Resources

(listed chronologically beginning with most recent) 

“Anticompetitive Prices.” Federal Trade Commission. August 2022. Available here. 

“Hospital Consolidation: A Fight Worth Having.” Keeping, J. Arnold Ventures. June 15, 2022. Available here. 

“Understanding Antitrust Laws.” Chen, J. Investopedia. May 2, 2022. Available here 

“Provider Consolidation and Competition Issues Ripe for Congressional Action.” Arnold Ventures. March 31, 2022. Available here 

“Cost and Quality of Care in Physician-Owned Hospitals: A Systematic Review.” Miller, B., Ehrenfeld, J., Meshnick, A., et al. Mercatus Center at George Mason University. September 7, 2021. Available here. 

“A Tool for States to Address Health Care Consolidation: Prohibiting Anticompetitive Health Plan Contracts.” Gudiksen, K., Fuse Brown, E., Butler, J. National Academy for State Health Policy. April 12, 2021. Available here. 

“California’s Sutter Health Settlement: What States Can Learn About Protecting Residents from the Effects of Health Care Provider Consolidation.” Waters, R. Milbank Memorial Fund. September 23, 2020. Available here. 

“A Lesson from States: Curtailing Anticompetitive Health Care Consolidation.” Spratt, Alexandra. Arnold Ventures. July 9, 2020. Available here 

“How Patients Benefit When Hospitals Come Together.” American Hospital Association. October 2019. Available here. 

“Antitrust Laws in Health Care: Evolving Trends.” Kumar, P. American Association for Physician Leadership. May 9, 2019. Available here. 

“FTC Policies Are Big Trouble for Hospitals.” Kaufman, K. Kaufman Hall. February 29, 2016. Available here. 

Additional Resources

(listed chronologically, beginning with the most recent)

“Price Transparency Noncompliance Rampant, Especially in Concentrated Markets, Rural Areas.” Muoio, D. Fierce Healthcare. June 8, 2022. Available here 

“Deciphering Sutter Health’s State-Court Settlement and Federal-Court Win in Parallel Antitrust Cases.” Bird, D., Varanini, E. Health Affairs. May 10, 2022. Available here. 

“Federal Antitrust Case Against Sutter Health Headed for Appeal.” Bannow, T. STAT News. April 26, 2022. Available here. 

“Baldwin & Braun Introduce Bipartisan Legislation to Crack Down on Anti-Competitive Practices in Health Care.” Baldwin, T. United States Senate. November 3, 2021. Available here. 

“Competition, Consolidation, and Evolution in the Pharmacy Market.” Seeley, E., Singh, S. Commonwealth Fund. August 12, 2021. Available here. 

“Biden Competition Order Targets Hospital Mergers, Surprise Medical Bills.” Evans, M. Wall Street Journal. July 10, 2021. Available here 

 “FAH Reacts to Executive Order on ‘Promoting Competition.’” Federation of American Hospitals. July 9, 2021. Available here. 

“Antitrust Applied: Hospital Consolidation Concerns and Solutions.” Senate Committee on the Judiciary. May 19, 2021. Available here. 

“Negotiating A Better Deal: Legislation to Lower the Cost of Prescription Drugs.” House Committee on Energy and Commerce. May 4, 2021. Available here. 

“Higher Medicare Spending on Imaging and Lab Services After Primary Care Physician Group Vertical Integration.” Whaley, C., Zhao, X., Richards, M., et al. Health Affairs. May 2021. Available here. 

“Equalizing Medicare Payments Regardless of Site-of-Care.” Committee for a Responsible Federal Budget. February 23, 2021. Available here. 

“Competition or Conflict of Interest—Stark Choices.” Miller, B., Ehrenfeld, J., Wu, A. JAMA Health Forum. February 22, 2021. Available here. 

“What We Know About Provider Consolidation.” Schwartz, K., Lopez, E., Rae, M., et al. Kaiser Family Foundation. September 2, 2020. Available here 

“Lowering The Cost of Prescription Drugs: Reducing Barriers to Market Competition.” House Committee on Energy and Commerce. March 13, 2019. Available here. 



Erin Fuse Brown, J.D., MPH 
Georgia State University College of Law, Catherine C. Henson Professor, Director, Center for Law, Health & Society 

Thomas Greaney, J.D. (moderator)
UC Hastings College of Law, Visiting Professor of Law 

Katie Gudiksen, Ph.D. 
The Source on Healthcare Price and Competition, UC Hastings College of Law, Executive Editor 

Kenneth Kaufman, MBA 
Kaufman Hall, Managing Director and Chair 

Brian Miller, M.D., MPH, MBA 
American Enterprise Institute, Nonresident Fellow; John Hopkins Medicine, Assistant Professor of Medicine 

Christopher Wheeler, J.D. 
Farella Braun + Martel, Partner 

Experts and Analysts

Laura Alexander, J.D. 
Washington Center for Equitable Growth, Director of Markets and Competition Policy 

Benedic N. Ippolito, Ph.D., M.S. 
American Enterprise Institute, Senior Fellow 

Nina Owcharenko Schaefer 
The Heritage Foundation, Director, Center for Health and Welfare Policy 

Erica Socker, Ph.D. 
Arnold Ventures, Vice President of Health Care, Payor Reform 
Alexandra Spratt, J.D. 
Arnold Ventures, Health Care Manager 


Bradley Albert, J.D. 
Federal Trade Commission Bureau of Competition, Deputy Assistant Director, Health Care Division 


Matt Eyles, M.S. 
America’s Health Insurance Plans, President and Chief Executive Officer 

Eliot Fishman, Ph.D. 
Families USA, Senior Director of Health Policy 

Maureen Hensley-Quinn, MPA 
National Academy for State Health Policy, Senior Program Director of Coverage, Cost and Value 

Donald May, MPA 
Federation of American Hospitals, Senior Vice President, Policy 

Ashley Thompson, MHA 
American Hospital Association, Senior Vice President, Public Policy Analysis and Development 


This is an unedited transcript.

Hello, everyone. Thank you for joining us for today’s briefing, Exploring the Market Competition Ecosystem: Lessons Learned and Next Steps.

I am OK, and yes, I am surprised at the last minute policy.

Those who are not new with the Alliance, welcome. We are non partisan resource for the policy community that is dedicated to advancing knowledge and understanding of health policy issues.

You can join today’s conversation on Twitter using the hashtag O, Health live.

Join our community at all health policy, as well as on Facebook and LinkedIn, alternate panel.

We have a Q&A section at the end of the hour.

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Now, you think it’s supported by Arnold Ventures and I’d like to introduce Alexandra Sprat Healthcare manager to provide some opening remarks.

As the Flexpay?

Thank you so much. OK, and thank you to the entire Alliance Team for their work, putting together this panel. I just wanna say thank you to our speakers. I’m so looking forward to today’s discussion about healthcare competition and consolidation, which ultimately impacts health care costs for consumers, employers, and taxpayers.

For those of you who may not be familiar with Arnold Ventures, we are philanthropy focused on developing evidence based solutions to important domestic policy issues, things like criminal justice reform, higher education, and health care.

We fund research, policy, and technical assistance work to advance these policies at the state and federal level.

And the healthcare space were particularly focus on the primary driver health care costs for the privately insured eye, hospital and provider prices.

Healthcare consolidation, the issue at hand for this discussion is widely considered as a key driver of these prices, as a robust body of research has found that different types of consolidation can raise these prices without corresponding changes in quality.

However, different types of consolidation may have different outcomes and may require different policy approaches for improving competition.

Today’s discussion will dive into these issues.

What are the different types of consolidation, What Margaret forces are driving these forces of consolidation, what our policy opportunities for improving these types of crop consolidation and improving competition and healthcare markets.

So that is particularly timely as health care market dynamics are increasingly garnering public and policymaker attention on the Congress, the administration, and at the state level.

As the speakers dive into the discussion today, keep in mind that health care consolidation, shifting the conqueror as possible, and physician markets beyond cost issues, on impacts the prices we pay for care, also impacts how we access it and how care is delivered.

Thanks again, to the Alliance and the speakers today for the forthcoming discussion.

I hope you all find this informative for your work, thank you.

Thank you, Alex.

Now, I’m excited to introduce Thomas screening, our moderator for today’s event. Thomas is a Present Professor of Law at UC Hastings College of Law.

Gets written extensively on Topics on Public Health, Law and Policy, Antitrust Law and Health Care Financing. and as a co-author of the Nation’s Leading Health Law, Casebook and Hornbook.

He has to have a task before the Judiciary Committee on the US House of Representatives.

For the FTC, was Department of Justice and State Attorneys General Health Law Enforcement issues. Mister … to have you here with us today. And to hear some marks from you as well. I’ll turn it over to you.

Thank you.

OK, um, I’m going to begin with a little table setting for our panelists before we get to them.

Our topic today is one that, those of us who’ve labored in the vineyards of antitrust in health care have been talking about for many years, the relationship between market concentration, the cost and quality of our health care system. Our first speaker today, Professor … Brown, will go into some detail on this relationship.

But the gist of the economic evidence is that one, almost every sector of the healthcare industry is highly concentrated, especially hospitals, specialty physician practices, and health insurance. Second, a strong consensus of economic and policy studies provides evidence that concentration is associated with high prices in each of the sectors I just mentioned.

But at the same time, we see considerable diversity in the in these sectors. Especially in the hospital sector says large number of those facilities are losing money. While at the same time, some giant systems have accumulated enormous reserves and have become what some authors call mega providers.

Likewise, so there’s a wide diversity among physician practices with special specialists.

Can. Obtaining far more bargaining leverage in higher incomes?

By the way, let me just plug plug, plug a book recently published by David drain off and Watan Variance entitled Big Med Mega Providers at the high cost of Healthcare in America. It’s a nice summary of the history of provider concentration and its effects. So the corollary question for lawyers and policymakers is, wasn’t nearly trust supposed to protect consumers? And wasn’t the original intent of those laws to stop abuses that flow from excess market power?

Well, first of all, antitrust enforcement has been something of a roller coaster ride in the courts.

In the 19 nineties, state and federal government prosecutors lost a series of litigated challenges to hospital mergers and concentration increased significance.

However, the Federal Trade Commission undertook a retro series of retrospective studies of those consummated mergers, which tended to indicate that, frankly, the Court’s got it wrong, IE the prices increased significantly at the merged hospitals, just as the prosecutors had predicted and that the courts had approved.

So armed with more economically sound methodology for defining markets, the Government then went on an extended winning streak in challenging horizontal hospital mergers, but it’s notable that the Government’s cases focused almost exclusively Unchallenging local horizontal mergers. 3 to 2 mergers 4 to 3 mergers even 2 to 1 mergers. So there’s still considerable uncertainty and cost in challenging mergers. So nearly every week we see cygnus significantly concentrative mergers being proposed. not just horizontal mergers but vertical affiliations as well.

So a number of us have pointed out that there are serious holes in the antitrust safety net. the significant growth in hospital acquisitions of physician practices, and most vertical combinations have gone unchallenged by the government. Many fly under the radar screen and escape scrutiny altogether. But again, economic studies show price increases result from hospital acquisitions of physician practices.

The government’s reluctance may be understandable here because the judiciary especially recently has shown an unwillingness to accept challenges based on vertical claims, and there is increasing evidence that vertical combinations involving middlemen, insurers, PBMs may raise costs.

So again, it’s an open question, whether antitrust law can be an effective tool for dealing with many of the major concentrative combinations that are going forward today.

Another gap in merger, concerns mergers that enable large systems to extend their market power across markets beyond their local local markets. And a number of recent economic studies have shown that some acquisitions by health systems that go outside their local markets, also tend to increase prices significantly. Those of you who followed the recent Sutter litigation, no private lawsuit in a suit by the California Attorney General have raised these questions, and we’ll talk a little about that coming forward. So what does all this suggest?

For health care policy, while we’re here, we’ll hear hear from Katie …, an account of the legislative responses to this problem. Many states are adopting a wide variety of measures designed to curb the market power of dominant providers and to address the market concentration problem. And there has been some efforts at the federal level as well.

So finally, what we’ll do in our session at the end of this webinar, We’ll call on the collective expertise of our, of our big brains on the panel.

To tackle the critical question, what, in this politically polarized era, are practical and achievable, policy solutions to improving competitive conditions in healthcare.

So with that, let me, let me give a brief introduction of our exciting lineup of panelists today. And you’ll see their full bios in the webinar materials on the Alliance’s website. First we have Aaron who’s a Brown who is the Catherine Henson Professor of law and directs the Health Law Center at Georgia State University. She specializes in health law policy and her research focuses on health reform, consumer protection, and health care and health care, because consolidation. Second, we’ll hear from doctor Brian Miller, who is a fellow at the American Enterprise Institute, where he focuses on Medicare payment policy, FDA regulatory policy, healthcare competition, policy, veterans’ health, and public health.

Concurrently, doctor Miller is also a practicing hospitalist at the Johns Hopkins, Johns Hopkins Hospital and Assistant Professor of Medicine at Johns Hopkins University. Next, we’ll hear from Kenneth Kaufman, the Managing Director and Chair at Kaufman Hall for more than 40 years. Ken has been one of the leading thinkers in the future of health care, and this helps healthcare organizations of all size was their strategic challenges.

Will also have my colleague from Hastings doctor Katie …, Executive Director of the Source on Healthcare Price Competition at UC Hastings College of Law. Shameless plug here a wonderful source for all sorts of information and data about health care, concentration and competition. She is a graduate of UCLA and UC Hastings Master of Science in Health Policy. Where she studied policy solutions promoting competition in the pharmaceutical industry and she’s been testifying widely before state legislators and think tanks about health care reform. And finally, we have Christopher Real or a partner at … Martell. Chris Litigates, complex civil matters with a focus on antitrust and other business disputes. He’s handled antitrust matters in Northern California, and across the country.

Oh, so, thank you all for joining us.

I think will have a terrific series of presentations and a, a exciting discussion at the end, and you are welcome to send your questions through the chat.

So, with that, I’m going to turn it over to Erin to start the ball rolling.

Hi, everyone. And thanks for that introduction. And thanks to Bailey and OK and the entire Alliance for hosting this webinar. I’m just going to, you know, give a little bit of terminology definitions and talk a little bit about the role of consolidation in the rising healthcare costs. Because in some ways, that’s sort of why we’re all here. You’ve probably heard from purchasers and consumers, citizens, and employers.

Everyone is struggling with rising healthcare costs and the root cause of the US. Health Care costs conundrum is soaring health care prices driven by health care consolidation.

So healthcare costs, like any other costs, are a function of price times utilization.

But as the late great health economist, Reinhard noted nearly 20 years ago, 20 plus years ago, the key reason US health care spending is so much higher than every other wealthy developed country is that our prices are higher. It’s not.

And here’s the important point. It’s not our utilization. We don’t actually use more health care. And so let’s say really wanted to control healthcare costs. We have to focus on policies to control prices. And if we want to control prices, we have to look at healthcare consolidation. So that’s why we’re here today. Next slide.

So, healthcare consolidation, we can go to the next slide, the one with the news headlines.

Great, so how can consolidation has been rampant for the past few decades and it’s really continuing in, you know, at a fast clip. So sometimes the consolidation is obvious, as Tim pointed out, such as when two or more hospitals in the same city or the same geographic area merge, That’s a classic example of a horizontal merger. But increasingly consolidation is occurring through non horizontal deals.

So for example, you may have seen recent headlines about Amazon or CMS CVS making multi-billion dollar acquisitions, physician groups or if health plans like United or Humana forming joint ventures with providers or healthcare data analytics firms. These are also forms of healthcare consolidation.

The buyers are not just healthcare companies like Health systems or health plans, but increasingly, they are include private equity firms and publicly traded companies. So, private equity firms like Welsh, Carson are providing a lot of capital to fuel these acquisitions. We also have Wal-Mart and other types of retailers that are providing entering the space and, again, infusing capital, but in the process contributing to consolidations.

All right. So what are we talking about when we use these terms, like horizontal and vertical? Let’s define some terminology on the next slide.

So horizontal mergers, or the mergers of direct our direct competitors in the same geographic market. So an obvious example, again, are the hospital, hospital mergers, but we also can imagine there’d be horizontal consolidation of physician practices. So if you see, you know, anything that that our direct competitors in the same market, that would be considered a horizontal merger.

But we are, again, seeing the rise of non horizontal consolidation, including vertical and cross market mergers. So Vertical Consolidation involves the combination of two or more different steps in the supply chain.

So in health care, the classic example of Vertical Consolidation is a health care system buying up a physician group.

Um, it also could include the combination of a health insurance plan, with a large physician practice, such as United An Opt In, or a retailer with a home health provider, and data processing platform like the CBS Signify Deal. So there are also cross market mergers.

Just him mentioned, which involve mergers across geographic, or product markets or boats.

Examples of this include the expansion of the Catholic health systems across geographic regions, across state lines, or private equity backed physician staffing firms that buy up many practices across many different states.

So historically, antitrust enforcers have really not paid much attention to vertical across market mergers, because they believe the anti competitive effects to be modest or ambiguous, but the evidence is emerging that all of these forms of consolidation pose risks to competition, cost, and access.

Next slide.

So here are some trends, and this data is actually quite, it’s actually quite dated, but it is showing the general upward slope.

And every, nearly every major segment of the health care market is becoming more concentrated over time.

So even as of 2016, 90% of hospital markets, 65% of specialty markets, and 57% have been share markets, and 39% of primary care markets were highly concentrated.

Next slide.

This is even an older slide, but again, details, hospital consolidation, and over the last 25, 30 years, there’s been more than 6500 hospital mergers. Nearly half of those occurred in the, in the recent past. So, hospital market consolidation is still ongoing, and it is increased so much so that the average market in the 19 eighties, maybe had five independent hospitals or hospital systems, and that is now decreased to 2 or 3.

Some markets only have one dominant hospital. If you think about your own local market, you can imagine that is happening in your market and multiply that across the entire country.

Next slide.

Physician markets, which traditionally were more competitive than hospital markets, are also becoming consolidated, either through the formation of large physician groups, or hospital acquisitions, or private equity acquisitions of physician groups. And again, recently, retailers are entering this space as well. Many of these trends are exacerbated by healthcare payment delivery reforms, such as accountable care organizations, where providers are seeking to become bigger to achieve economies of scale and scope that they need to take on risk based contracting.

They use it to invest in common information technology, but most of these physician mergers, as Tim mentioned, are just too small in dollar amounts to be reported under the Hart Scott Rodino notifications and therefore, they don’t get any review at all.

So, as of 2022, nearly 74% of physicians are employed by hospitals, health systems, or a corporate entity. And so, the era of the independent physician practice is ending.

Next slide.

And as I mentioned, the main determinant of high of health care prices is provider market power. It’s not quality. It’s not the input or labor costs. It is really the market power, the power to drive up prices. That has been formed when you see all of this consolidation in the, in the healthcare market.

And the consolidation, again, continues. And many of these are going on reviewed, because they are too small to trigger federal antitrust notification, or there’s just too many deals going on for the FTC, the DOJ. And even State attorneys general to really keep an eye out for all of the healthcare consolidation that is happening. So all of this consolidation increases market power, which in turn drives up prices for these dominant health systems or buyers. And yet, the healthcare provider, higher priced providers are not better quality.

So all of these excess health care costs from these dominant health systems and dominant players are buying us neither more or better quality health care. So next slide.

And this is just a short summary of some of the evidence, the reason to be concerned about all of this health care consolidation does that’s extremely well documented in the literature that higher levels of concentration leads to higher prices. We know, of course, that hospital mergers lead to significantly higher prices, double digit increases, particularly in higher highly concentrated.

Of course, now most hospital markets are highly concentrated.

But we also see evidence that physician consolidation, whether horizontal or for or vertical, also raises prices significantly.

And what about all the efficiencies and quality improvements from vertical mergers that hospitals and physicians are touting.

And all of these different payers and the integrated delivery system reforms are trying to get us, well, these two are associated with higher prices for hospitals, for physicians, and higher total spending for patients, per patient.

So, the data are all pointing in the same direction.

Vertical integration, cross market integration, and horizontal integration, all raise prices. And the evidence of the impact of all of this consolidation on quality is mixed at best. So the net effect of all of this consolidation of healthcare is significant increases in health care costs, but without any improvements, are much improvement in terms of quality.

So, I have a couple more slides I’m gonna save for later, and I’ll turn it over to the next speaker, because next, just talk about some of the policies that we might be able to to use to address the rise in consolidation.

Erin, it’s Tim. one quick question you point out as we know there’s a gold rush going on as hospitals are requiring physician practices. Some of them are doing it defensively.

In fact, I wonder if, you think that private equity should be regarded as, at least a, to some extent, a safety valve that limits hospital acquisitions, and maybe that private equity at least, enable some physicians to maintain a degree of independence. Should we look at it that way?

Um, I would love to look at it that way. Unfortunately, that’s not sort of how I see it.

I think that the, the physician practice areas that we see private equity scooping up and targeting are not the ones that health systems typically wanted to buy or payers for that matter.

And so we see in some ways it’s a different it’s a different market. It’s not like a private equity is competing against health systems. They’re really looking at a different set of specialists, whether it’s the emergency medicine and anesthesiology to you to, you know, use out of network surprise medical billing in the days of the pre NSA, as a revenue stream or an ophthalmologist, and grass gastroenterologists to get more sort of, that wraparound procedural revenue. But, we see a lot of this activity happening in a way that doesn’t necessarily benefit the physician practice, in terms of its ability to stay independent. because instead, you substitute the revenue pressure.

Because of the private equity, company, and management, as opposed to the, you know, the integration of the hospitals. So I wish they were, you know, in some ways, providing a safety valve, but I think in some ways, it’s just another version of the same problem.

Thanks, Thanks, very interesting. I’ve turn it over to doctor Brian Miller, you’re up next.

Thank you. Next slide.

Um, first of all, thank you all for organizing. I think, I think this is a really timely topic.

It’s a fun topic, and it’s one that, you know, Tim mentioned, the antitrust community has historically addressed, and it has not made its way into the health care policy community.

So I’m excited to see it venturing into our normal space.

And I actually worked at the Federal Trade Commission on hospital mergers. So it’s exciting.

two, see this merger of spaces and then also hear the winning streak.

Describe a comment on private equity before I move on, which is that that can be an escape valve, if private equity firms are actually improving operations, clinical operations. That is, as opposed to just rolling up practices to increase their market power against health plans. So, could be, but not necessarily.

But on to consolidation more broadly, as a practicing physician, I experienced the monopsony power of health systems in terms of choice of employment, and as do many of my colleagues.

And so, when I was thinking about hospital consolidation, first out, of course, was standard oil. Next slide.

And, uh, I’m going to continue for a moment, making us depressed as we just sort of again, rehash and no healthcare delivery has horizontally consolidated, or 90% of MSAs are concentrated.

It had 70 hospital mergers. I cannot keep track it seems like.

Every day in my e-mail inbox and becher’s, there’s a another hospital merger that is announced.

Then of course, hospitals have been going and buying everything in sight.

sort of like me at a buffet, having fun. So they’ve been buying physician practices, they combine ASCS, home health company, is Telehealth.

They’ve been going all over the place, and they sort of turned it into an octopus and there are a variety of stats there that you can see.

Next slide.

So then the question is just like, Why do any of us in health care policy care about this issue? Like, what, what is it that gets us out of bed in the morning?

And why is it that gets members of Congress and their staff out of bed in the morning on this issue?

And the answer is this, while healthcare, as we’ve talked about, super expensive and it’s super expensive for, you know, the average American unmaking 55, $60,000 a year, that $2000 deductible and 20% co-insurance.

You know, there’s 20, $30 co-pays for physician visits, and $150 co-pay for it, ER visit like that. That starts to add up.

Then everyone says, Well, you know, it’s just stuff, health plans, you know, big mean insurance companies. And the answer is, health insurance companies are really just a proxy for high costs.

It’s not that health plans are perfect, but, you know, the health plan is offering you an insurance products in whatever marketplace you are, and it’s composed of products and services.

Those products, or services are from monopoly or oligopoly provider. Your costs are higher.

Historically, the health care policy community has added increased insurance subsidies that really just masked the problem rather than addressing the underlying issue consolidation.

Then, of course, you know, as a clinician and also as a patient, my concern, this should be all of our concern. It’s actually started the scary long-term. one is that lack of competition produces sort of an ossified market with fat, much innovation.

And we’re all going into the same place at different speeds.

And we’re all going to get sick eventually.

You could advance.

And so this is why I was talking about this is from the bureau of Labor statistics, and, you know, my economist friends and I constantly sort of debate, like, how you measure labor productivity and service market.

But as you can see, that red so that dashed dark blue is output and the light blue is hours worked.

Increasingly hours in front of the computer, typing out an electronic health record.

Then that sort of orange color is labor productivity.

And you can see that about when I started medical school, which was an increasingly long time ago, that curve has remained relatively flat.

And that is something that we all experience as patients or family members of patients.

Next slide.

And so the evidence about arms for horizontal hospital consolidation is pretty clear.

And, yeah, there’s this nice, what’s the joke? You can pick your favorite study.

Well, here, you actually really can’t pick your favorite study, because all the studies say essentially the same thing, which is that if you buy your largest competitor, unsurprisingly, prices go up.

There aren’t quality gains, and there are potential patient experienced detriments.

Then there’s a sort of interesting flavor on that and a labor market perspective, which is the sort of loss of the locus of control.

Are clinicians leading to burnout, which the came up in the National Academy of Medicine Study.

Next slide.

So the question we have is: what to do.

Right? I know we talked about a long list of problems, And I’m sort of a pregnancy test. And I don’t want less problems that solutions. Next slide.

So, sort of putting on my doctor hat first thought is, well, we don’t want to make things worse.

And the first thing, which we have historically gone to or pulled out of our policy belt is no, administrative pricing.

Rate regulation, price caps.

Restrictions on price growth.

So, those promote a static market. They’re subject to, regulatory capture, the physician, fee schedule being, one of them, as right now, there is ongoing, a lot of lobbying by medical specialty societies about it.

And, uh, as a pragmatist, more importantly, it doesn’t really work very well.

We use price regulation in the Medicare Fee for Service Program.

And yeah, going back to my intro to health care management class, probably 15 years ago, if you think about cost of healthcare.

And so a bunch of that the price of the service, which in administrative pricing we set, or reset the growth rate of the volume of the service. Then this funny thing called intestate of service.

So I include those little brackets, but fee for service directly regulates price.

Sometimes addresses volume through utilization, review and management, prior auth, et cetera, which fee for service Medicare does not.

And then intensive care, which remains unaddressed.

We have also tried episodic bundling and set prices for DR days.

Well, as we found, you can also just re-admit patients, charge another DRG.

Then we said, Wait.

We’re going to do the Hospital re-admissions Reduction Program, prevent utilization.

Then they just admitted patients as an observation, say which was not included in the index, the answer is is that rate regulation is generally ineffective, capitation where you set a budget for a population is one of the traditional tools that’s work.

Now, the tool is that states, as hospitals have gotten increasingly upset.

The hospital and merge enforcement have gotten to something called a certificate of public advantage, or COPPA, where the States sort of blesses a merger and replaces competition with State regulatory oversight. And the FTC actually just released a excellent paper, revealing this.

Next slide.

So another question is, is, what can we do? Well, we want a dynamic market. We want people to compete.

So the first thing is, well, give the FTC more staff.

I give them more staff to do hospital merger enforcement. And, of course, importantly, address anti competitive hospital behavior.

So right now, um, the FTC has authority to address non-profit hospital mergers.

They do not have the authority to address non-profit hospital anti competitive conduct, Which has to get referred over to the DOJ.

Not that the DOJ is unable to, was unable to do this, but it’s more efficient. Same staff, video hospital merger enforcement to address other issues, related hospitals.

Another thing we can do is, with so much going on, we can create a state competition index to, sort of target enforcement, you know, give a map for the FTC, and the DOJ.

And then, most importantly, take the government’s foot off the accelerator.

So, what has happened is that we’ve created all these payment policy arbitrage opportunities.

For example, we don’t historically have not had sight neutral payment.

So you can buy a practice and then they’ll more to the outpatient physician practice or the LPS, and then also charge a facility fee. So, I ran a practice. I get bought by a hospital.

The hospital can bump my rate 60% that’s been addressed, but there are other areas where Sike neutral payment doesn’t exist. Where we can implement it.

And that, of course, has driven hospitals to acquire physician practices.

340 B is another example where now a statute created with the best of intended to provide low-cost pharmaceuticals.

Populations that otherwise can’t port them, has now expanded into a massive program where entire facilities qualify for low-cost pharmaceuticals.

But there’s no requirement that those low cost pharmaceuticals are deliver to the patients that actually need them, hence, premiering, hospital acquisition, that physician practices. And now, the question, of course, you get is Brian Welle. No. Great.

So, you take the foot off the accelerator, but it’s the hospital slash now health system going to dump these practices.

And the answer is, yes, There have been large waves of hospital outpatient practice acquisition.

And the hospitals struggled to manage them, and then they end up selling them 5 to 5 to 10 years later.

So, if you take our foot off the accelerator, one, will stop acquisition, or at least remove the incentives for acquisition.

And potentially, then, the hospitals will shed some of these practices later, creating more dynamic market.

And then, the last one, which is the one that is always the hardest. It’s encouraging entry, right? Billing hospitals hard, Being a hospital CEO is not an easy job.

You have to oversee operating rooms, intensive care units. You have a pharmaceutical product supply chain, medical device, supply chain. You have all types of clinician, labor, unions you have to negotiate with, it’s not an easy business, insurance contracts negotiate.

So, one thing we can do is, is that eliminate certificate of need, which at the state level allows market, participants and the state to determine whether a facility is needed. Now, last time I checked, having our competitors decide if we can open a business is probably not going to be a winning proposition.

two other things that we can do, is we can promote competition from physician owned and operated enterprise, with corporate owned and operated enterprise by eliminating the ban on physicians and hospitals from participating in Medicare.

And then also, having potential stark law reforms in a managed care environment, where utilization review and prior authorization or can address, you know, if there’s inappropriate or abusive practices and self referral.

So with that, thank you.

Everything else?

Thanks, Brian. one quick question.

We had an interesting question from our, our audience asking this consolidation effect staffing, is it, is it one of the explanatory variables that that tells us why some hospitals are short staffed, I think you, you showed some labor data on that. So can we find between the two?

So, yeah.

I think that, you know, consolidation is, well, it’s bad for all types of clinical labor.

So why?

If you’re a clinician and you’re in a market and you have two health systems you can work for.

one Health system has a non-compete that has a 25 mile, radius, you, or even lager. You can potentially have to move out of state, operate your entire family, redo your medical licenses.

Go through the credentialing and privileging at the facility, align with all health plans all over again.

So functionally you’re tracking your job actually know an interventional cardiologist whose non-compete was so strong from his monopolist health system that he would have had to move three states way.

Now, non competes, I understand, like if you’re developing some rare pharmaceutical product and you’re the scientist who developed it, has a clear function.

But for clinical labor, it seems to be largely abused by Monopolists to keep clinical labor captive and at lower costs, and unable to then negotiate your working conditions.

Well, I want to save your encouraged dynamism slide for our discussion at the end, since you’ve laid out a nice template of possible reforms. Will go to that at the end.

Thank you much, and, uh, Ken, you’re up next. Let me turn it over to you.

Good morning, or afternoon, depending on where you are.

I want to thank the alliance for inviting me to participate in this webinar today.

Basically, what you’ve accomplished is giving somebody the opportunity to make an alternative case for this situation.

Everybody else on the panel is uni directional, in terms of their perspective and approach.

And I have remarkably and radically different perspective on what to go going on, and I am very pleased to be able to, to put that forward. If we could go to the next slide.

Next slide, please.

So my position on this working in the real-world for 45 years, as a consultant, mostly to hospitals throughout the United States, and mostly to the not for-profit sector, is that the regulatory approach That’s currently being used, especially towards the not for-profit health care organizations in the United States, is based on a very narrow theory that prices to consumers are negatively impacted by consolidating providers, as we heard from our first two speakers.

However, if you’re actually operating in a hospital within greater American economy, right now, you can, you certainly can see, is the CEO or board member.

But this is an overly narrow way to help market the healthcare market really doesn’t function in the way that we heard the description of the first two speakers, and I imagine the next two as well.

Rather regulation would be would be much improved relative to the provider community if it was seen through the lens of the macroeconomic environment, within which health systems actually operate.

And so my point here is the following is that the macroeconomic forces of the current American economy are damaging the clinical and financial integrity of hospitals significantly, and I’ll show you a slide shortly that demonstrates this.

And so in order to contend with these macroeconomic forces and the ongoing deterioration of provider capability, then a reasonable level of consolidation is going to be required, not required from the point of view of the hospital business, but from the point of view of how the American economy actually operates on a day-to-day basis, and the fact that health care organizations have to operate in that economy.

Next slide, please.

So, everything in the American economy is getting bigger and it’s unrealistic to expect that hospitals don’t need to get bigger.

Also, in order to, to generate the necessary level of capital capacity to generate the necessary cash flow and in order to be able to invest in in facilities and clinical development, innovation in order to continue to provide a better and better product to their communities.

And so, this slide is really demonstrative.

Here you can see, looking from 2010 to 2021.

And 11 year period, which demonstrates how fast, and how exhilarated are economic changes in the United States.

You can see how Amazon has grown during that period, how big they are, how Apple has grown. How big they are.

Google, and United Healthcare. And I want to point out to everybody who’s on this call today, and enjoying this webinar, the United Healthcare is now bigger than Google.

And you may say, well, you know, that’s a problem, where you’re, from your perspective, but the problem is really magnified. If you’re actually trying to run a hospital in that kind of insurance environment.

You can see where Anthony moves.

Then, you can see Kaiser Permanente, the largest, not for-profit health care system in the United States, which has both a health care provider network and an insurance network. And then three of the larger, not for-profit, common spirit, provenance and Ascension and you can see how little they’ve grown over that period of time.

My contention is, is that when you see this kind of size in the economy, and you see this accelerating size, then you see the hospital providers constrain On their side is making it more and more difficult every day for them to compete for the necessary resources in order to provide the services to their communities that their community demands.

Next slide.

So here’s where we are, you know, the kids have an expression IRL in real life, and this is in real life.

This is not, this is not some study, This is not. This is what is happening on the ground, the hospitals right now.

And so the combination of the pandemic, the inflationary economy that we’re experiencing.

And a prohibitive and pejorative regulatory environment have seriously weakened the not for-profit health care network with the following result.

More than half of hospitals are projected to have negative operating margins through 2022.

And under an optimistic scenario, 53% of hospitals will have negative operating margins. And under a pessimistic scenario, 68% of hospitals would have negative operating margins. This is very significantly, deteriorating financial performance as compared to the pre pandemic period.

Expenses are incredible in the hospital space right now. Total expenses are projected to increase nearly $135 billion, between 2021 and 2022.

Labor expenses are projected to increase by 86 billion, while non labor expenses are projected to increase by 49 billion.

Hospitals are likely to face billions of dollars of losses in 2022, under any kind of scenario.

And under an optimistic scenario, operating margins will be down 37% compared with 2021. And under a pessimistic scenario, operating margins would be down 133%.

But the most important part of this is that we will begin to see, and I want to make this point to everybody on the call because it’s so important. We’re beginning to see because of these numbers and these factors are deterioration and access to services across the United States.

We’re beginning to see waiting times were important procedures like colonoscopy and mammograms that are absolutely unacceptable, especially if you have any thought that you might be sick.

And this is happening because of the deteriorating financial resource situation a a harsh, stamping in environment. And all of that has resulted in the fact that we don’t have the same type of clinical access right now that we had before we covered pandemic occurred.

And because for these other factors to place, next slide, please.

So, how does this actually affect community?

How does that, how does this community, so, I want to show you I’m finished with a case study here, which I think is important, and this is what I call the two hospital town case study.

So, basically, what everybody on the call needs to understand is, if you’re in a car to Hospital pound right now, you can’t merge. It can happen. You haven’t seen it to hospital merger in years and years.

But the problem is, is that there are many towns in the United States that are two hospitals. And because of the macroeconomic environment and the factors that I’ve shown you in three previous slides, and the regulation that will not allow these two hospital pounds to consolidate, you have a harmful set of factors that are developing for care in these communities.

And so, what is developed, historically, these two hospitals had very significant demographic reasons for being too hospitable town.

And in many cases, there was one hospital that was within the community that develops or ethnic and religious region, and another hospital that developed another way for other ethnic and religious reasons.

But those, those reasons, and in developing to hospital pound, good, sometimes go back 80, 90, 100, 125 years, to a taught an economic time, that does not relate to where we are right now, from a macroeconomic structure. So the best way to, to, to develop, to provide a higher level of access and a higher level of quality in these many to hospital communities, would be to merge to one hospital, because that is the economic set of relationships that we have right now. And Health System Executives would view the Merger Option as a far more positive approach for Community Than the Alternative. And the alternative right now allows one organization to decline financially clinically over a period of years. So you have one relatively good, hospital in town, and you have one relatively hospital. But it’s having a harder and harder time providing significant clinical problems.

So over the past 20 years, the regulatory apparatus has made it close to impossible for hospitals to merge in these two hospital pounds. The most recent decision was the prevention of a to hospital merger in New Brunswick, New Jersey.

So such a regulatory approach is actually, in my opinion, raising local health care costs and forcing the maintenance of service lines an axis in that community whose quality is suspect.

And with that, I’d like to conclude, and I look forward to the discussion period. Thank you very much to mister … for moderating the conversation.

Thank you. Can you raise a number of really interesting points? Let me ask you about the negative operating margins of many hospitals. How much of that is attributable to the ungenerous reimbursement policies under Medicaid. And the lack of expansion in the in the the non expansion states are those the hospitals that are really taking the hit and it so is your, is your brief sort of in favor of more generous government reimbursement?

Well, I think, I think you know, eventually I have to get to that, Right?

So, so the, the reasons for the reasons. For the financial difficulties that we’ve entered 2 into 2022 I think are related to 2 to 3 factors.

We’re not, you know, I think much of it comes from the pandemic but we can’t unpack that yet. We just don’t know enough about unpacking it.

So, we have, we have, we have Medicaid reimbursement in most States, which is which is, which is ungenerous in your, in your, in your wording.

We have Medicare reimbursement, which is insufficient for most hospitals, but we also have the commercial players, the the blue crosses of the world in the United of the world, who are, who are beating down on hospitals in an unprecedented way right now.

I, I did a major talk for large system CEOs a number of months ago, and I wasn’t 15 minutes into the talk.

And the only thing they wanted to talk about was the difficulties they were having, with the large third party commercial payers. Not only in terms of the rates that they were getting, but the fact that they weren’t getting paid in a prompt, and timely and fair way.

So, you take that, and then you combine it with this expense problem that we’re having right now, through the inflation, and it’s generated significant losses. For many organizations, I want to point out to your audience, however, that they’re probably thinking, that the losses are in, you know, the hospitals that were already struggling. That is not true.

Cleveland Clinic recorded a billion dollar loss for the last quarter. Mass General recorded a $900 million loss. Ascension recorded a $2 billion loss, and essentially hasn’t lost the dollar in 40 years.

And the same is true, you can just go down the line, so would Medicaid Expansion help?

Yes, but I don’t think it relates to your point and the way you thought that it did.

Well, thank you. Let’s move along.

We’re falling a little behind, but let me move it on to Katie …, who’s going to talk about efforts at the state level and federal level, as well, to try to come up with, with solutions.

Thanks, Tim.

You can put it on the next slide.

Um, so thanks to the alliance for inviting me here today, and for putting on this interesting seminar. I’m going to spend the next few minutes talking about what state policymakers can do about consolidated healthcare providers. Next slide.

And so in my research, we typically like to think about these sort of state actions in two buckets. The first is what states can do pre merger to prevent any competitive consolidation and to be sensitive to consolidation. That should happen, and in the second bucket is what states could do after consolidation is.

Aye to help mitigate the harm, so pricing harms of consolidate markets, and I’m going to talk very briefly about both. So first, I’m going to talk about what States can do to prevent future harmful consolidation, and that includes increased notice of proposed transactions and an administrative review process.

Next slide.

Because any test enforcers have been allowed to unscramble the Agora, Break apart health systems, once they emerged. It’s particularly important for States to become aware of and review transactions before they happen.

So as Erin mentioned, transactions that are above the Hart Scott Rodino threshold, which this year was $1, those transactions must give Federal regulators 30 days notice before they close.

And while this is important for large murders, it may certainly miss acquisitions of small hospitals and almost certainly missed acquisitions of small physician groups.

At the source, we’ve looked at state merger review laws across the country to examine state laws that supplement these federal requirements.

And as you can see, many states require non-profit hospitals to file notice with the AG’s office or Estate Certificate of Need program, sometimes the Department of Health. And those reviews are typically to make sure that the transaction is within the charitable mission of the hospital.

Often, this is not really an examination of antitrust concerns, but in some states like California, and also in Rhode Island, the state allows the AG to oppose the merger if it’s not in the public interest.

three states, Colorado Hawaiian Island require this notice of all hospitals. 60 days the foreclosing a merger.

Giving the state AG time to review the merger and four states Washington, Oregon, Connecticut, and Massachusetts require most physician groups to report to the AG or some other state agency, prior to an acquisition.

Now, while this helps the state monitor consolidation, typically the AG still has to go to court if they really want to oppose the merger.

And so the significant time and financial resources needed for a trial means that, in many states, the AG is only likely to block the largest and most problematic mergers. Which leave states vulnerable to serial acquisitions or stealth consolidations, where one Health System or private equity group kind of rolls up a number of physician practices over time.

Next slide.

So, I wanted to talk for just a minute, about three states that have established a separate state agency to review proposed track transactions and to give better oversight of the state on healthcare markets in that state. So, Massachusetts established the first one, the Health Policy Commission, back in 20 12, and it had been the only state with one of these commissions for a long time.

Any provider organization that has more than $25 million and patient revenue has to give the HPC and notice a material change 60 days before that. The close date, then the HPC doesn’t actually have the authority to directly block mergers mass. Let that authority with the AG.

But the HPC conducts a cost and market impact review to see if they determined that the proposed transaction might be detrimental to cost quality and access to care.

And then the HPC issue is a public letter and can collaborate, basically, give that report to the AG, who can use that in court, and those reports are often persuasive to a judge, and this collaboration has actually successfully challenged many mergers.

And now, mergers in Massachusetts often need something other than market power to justify a merger.

Much more recently, the state of Oregon passed a law in July of 2021, that gives the Oregon Health Authority. The authority to review transactions and their review process began last March.

With a few exceptions, healthcare entities with revenues above a threshold have to report to O HA before closing a transaction. Now, the Oregon Health Authority has actually a two stage review process.

So in the preliminary review, the Oregon Health Authority has 30 days to decide if they think that there’s going to be significant adverse effects in cost, access, quality, or equity, of health care in Oregon.

And if they decide that there are likely detrimental impacts are likely to be, then … has additional time to conduct a comprehensive review.

And then, during this review, they can actually convene a community review board to discuss things like access, whether the hospital or facility is needed in the community, what kind of services there could be.

They’re important to preserve. I thought the preliminary and comprehensive stages …, can can impose conditions on the merger.

They also have the authority to outright block a merger, but they can impose conditions like continued access to care, keeping maternity wards open, etcetera. This program is very new, so OHSAS only reviewed a handful of transactions. And so far, all have been approved at the preliminary review phase.

Earlier this year, California established the Office of Health Care affordability with the 2022 with approval of the 2020 budget.

Like Oregon, OCHA appears to be building on Massachusetts successes, but the details really aren’t known yet the Regulation’s haven’t been established.

So, I’m not going to talk in detail about coca, but they begin reviewing transactions in April of 2024.

In addition to sort of these market oversight regime, proposed transactions, all three of these agencies have the goal of improved transparency and affordability of healthcare in the state, which leads me to the second bucket of state actions. So, next slide, please?

Um, these are options that states have to restrict or, um, to restrict the use or abuse of extent market power. So in many markets, you can pick your analogy. The train has left the station, parcels let the stable, et cetera, But it’s clear that just preventing future mergers isn’t going to do much to improve competition or constrained prices.

So state legislatures have done a few things. First, they have passed laws restricting the way that health systems are allowed to contract with insurers and use market power in one market to increase prices in another market.

And some of the past was more directly restricting the pricing power of dominant providers or just more directly affecting prices.

So next slide, please.

I think Chris is going to talk more about the lawsuit against Sutter Health.

And and and some of that situation, but briefly the injected injunctive relief in that lawsuit in California. And also the lawsuit against atrium health in North Carolina contain provisions that Prohibited health system is from using particular contracting practices, and these include bans on all or nothing contracting. That’s where a health system demands and ensure take all of their facilities or none of them. So if this health system has dominant market position in one market, they can essentially tie that that market power to other communities, that that shouldn’t be competitive.

Then, secondly, anything or any steering clauses. If a health system uses these, they essentially tie the hands of insurers who want to steer enrollees to more cost effective, higher value care.

So, in the last legislative session, seven states considered and Nevada became the first state to pass a law prohibiting all or nothing contracting.

And similarly, eight states considered bills prohibiting any steering provisions. And Nevada joined the Massachusetts to become the second state to ban these classes.

The savings from these laws could be substantial when economists use data from Massachusetts, to estimate that in the most favorable market conditions, bans on any staring at NIH hearing loss could save up to 12% of health care costs. And that’s both through steering patients to higher value providers, or lower cost hospitals and introductions in negotiated prices as hospitals have to compete more effectively for inclusion and networks.

Next slide, please.

And finally, I want to talk about where I think many states are headed in controlling health care costs.

And that’s in more directly restricting prices or price increases.

And I think states have a spectrum of options that they can consider if they want to think about more directly affecting prices. At one end of the spectrum are cost growth benchmarks and this is where a state establishes some target for the rate at which total health care expenditures should increase in the state in a year. And typically it’s pegged to inflation or median income, something like that.

Cost growth benchmarks are mostly a transparency tool, And they kinda set expectations for insurers and employers in their negotiations about how fast health care costs should increase.

Currently, nine states either have or are actively implementing, a cost growth benchmark.

This includes the three state agencies.

the three states that have agencies that I talked about earlier, Massachusetts’, Oregon and California and all of those agencies also oversee this cost growth benchmark program.

Um, determining compliance with the cost growth benchmark for an individual provider, can be a bit of a problem in all three of these states. Do establish financial penalties for entities that don’t comply with the costs both benchmark.

Um, But, after a decade without any penalties, Massachusetts’ just issued its first performance improvement plan for Mass General.

And the maximum penalty it can apply is $500,000, which is less than 0.2% of the amount, by which the state claims the mass general exceeded the benchmarks or whether this is really an effective way for controlling costs or more a way to bring expectations and transparencies to states.

Here’s an open question.

At the other end of the spectrum are population based models.

These are essentially the capitated models that Brian mentioned, and that can be where a State establishes a budget for the total cost of care for some population, and then, participating providers are responsible for by fighting all that care to the population.

Vermont has an all payer ACO model that comes close to this population based model.

And they’re all payer ACO includes Medicare and Medicaid and the state’s largest commercial insurer, Vermont Blue Cross.

But Vermont’s model is largely voluntary and participation of hospitals, especially rural, hospitals, critical access hospitals, and employers with self funded insurance has been lower than helped.

In-between are some things that I’d be happy to talk about in the questions. But I don’t have time to talk about them all.

But, for example, there are affordability standards where the Department of Insurance can set maximum rates at which premiums can increase in a year and limit the rate at which provider prices can increase.

These can be pretty tuned to be sensitive to conditions in the state.

In addition, I just wanted to mention flexible global budgets, because these can provide, this is the payment model, where the state decides what the budget for the hospital should be for that. You’re often. This is the negotiations and historical rates, and it can be partially set and unfortunately, fixed based on volume. And this can help support hospitals through tough financial times like the pandemic where marilyn’s Global Budgets actually help the financial status status of hospitals in their states.

So, I’m happy to talk about any of these more in the questions.

But what I really want to emphasize is that states should make sure that they have, should recognize, policymakers should recognize that they have lots of options to consider when trying to mitigate harms of consolidation, both both before it happens, and then in consolidated markets. And states are uniquely positioned to think about local market conditions and specific providers in their states and tune these policies to match those.

Regardless of the policy, states should make sure that they have notice of proposed transactions. So they have time to review them to determine if they’re in the public interest or likely to cause harms.

States can set up agencies to review the impact of pros, transactions on any, anything that the state thinks is valuable, but specifically cost, access, quality, and equity, and then they can place conditions on specific mergers.

In ways that the feds are unlikely to do in local markets.

And finally, states should consider ways of addressing market power, either through bans on any competitive contracting practices or on more directly restricting prices. And I will turn it over to our next panelist. Thank you.

Thank you, Katie. one quick question here. Um, it looked to me from the maps and what we’ve, we’ve looked at the source.

It seems like this is somewhat of a red, state, blue state phenomenon, in other words, the, the the states that are active in initiating reforms directed at price and maybe moving towards rate setting or global budgets are blue states. Is that right? And if so, which of these reforms are are viable outside of the blue world?

I think, I think, the state agency isn’t sort of, once we talk about price setting, those are clearly a blue state phenomenon.

But I think that many of the other, especially contracting practices, that’s a really pro business approach, and I think many of the red states are moving in that direction. And some states like Nevada aren’t necessarily the first ones that come to mind when I think of dark blue states.

So I think as state policy makers are recognizing how health care costs are crowding out other state priorities and affecting employers in their states. I think we’ll see more motion especially at the left-hand side of the graph.

Here is sort of overall caps or some kind of restrictions that allow businesses or industry to negotiate under those caps to control costs.

Well, very interesting. Well, we’re going to we’re going to run through of your smorgasbord of options with, with the full panel and a few minutes. But first I want to turn it over to our last panelist.

I was going to say our Aaron judge, batting cleanup. But I’m a Red Sox fan. So I’ll call you David Ortiz. But Chris, take it away.

Can you hear me?


Great, Thank you.

Thank you, Tim, for her, asked me to baton to me, thank you to the Alliance for putting together this extraordinary panel.

Real experts, my practice is representing state attorney generals who are concerned about healthcare antitrust issues.

Tim had remarked at the outset that we are in a politically polarized environment. I can tell you that concerns about health care are not a blue state or a red state phenomenon. That my clients and red and blue states are very concerned about this.

And I don’t think there’s anyone who believes that spending 100% of our nation’s economic output on health care is acceptable.

Want to pick up a little bit on some points that Katie had made in talking a little bit about what the state’s perspective is here.

You know, once you have a concentrated market be that a provider market or ensure market, you really have two options.

one is, you can try to regulate that market, or second, you can try to enforce antitrust laws if you see conduct that you believe is anti competitive.

Both of those approaches are imperfect regulation is, I think, Brian explained quite well is, is, is, is often perfect.

It’s very difficult to replicate the effects of competition and enforcement is very expensive and very slow as the Sutter Health case for tribes litigated demonstrates.

In the Federal Center Health Case, went to trial earlier this year. That case was filed in 2013.

So if it takes you nine years to get to trial, it tells you something about what is involved in enforcing antitrust laws, in the healthcare context of the uprising and the class action.

So it’s important for first states to make sure that their markets do not become excessively concentrated in the first instance and I do believe that effective merger review is a big part of that.

The problem with merger review is that is it expanded, is expensive, and it is specialized.

And so while the Federal Trade Commission has significant resources and expertise, including in house economists, state attorney generals do not have that.

And I want to talk a little bit about what we saw earlier this year, in Rhode Island, where the Rhode Island E G.

was asked to review the merger between the two largest health systems.

In Rhode Island, Canada had referenced to hospital Towns.

Rhode Island was about, was essentially to hospital state and the two largest health systems, lifespan of care in New England had proposed to emerge.

They would have collectively accounted for over 80% of inpatient discharges in the state of Rhode Island.

And what Ryan had a unique tool called the hospital conversion hack.

And just a couple of years ago, they had added to that statute, an additional criteria for reviewing hospital mergers.

And that criteria was clients with the Rhode Island antitrust X, And they were able to use that process to conduct what I think is uniquely meaningful review. A full disclosure.

I represent a very general in that review, but there were a number of issues that came up in that review that I think are relevant to the discussion that we’re having today.

Um, the first is Rhode Island does have a regulatory body called the Office of Health Insurance Commissioner, which sets what are known as hospital rate caps in Rhode Island and also certain quality metrics.

And, and as it’s known in around has been lauded for its work.

It’s been I think a third favorable article in Health Affairs describe how effective it was in the merging parties.

Relied upon, OK, I have to say, look, you shouldn’t be concerned about prices, because we have this very second regulator who’s going to keep prices down.

Ultimately, the Rhode Island Attorney General concluded that that was not persuasive, that no regulatory regimes immutable, all regulatory regimes are subject to regulatory capture or pressure, especially when you’re dealing with very politically powerful, large employers in the state.

And it’s very difficult, as I said, at the outset, it’s very difficult to replicate the effects of competition.

There are many non price dimensions to competition, such as innovation and access.

It simply cannot be regulated through, through regulatory body.

So ultimately, the Attorney General found that that was not a sufficient basis to allow the merger to go forward.

There were a couple other issues in the merger that I think are relevant to the discussion we’ve had today.

one is this notion of efficiency and see, you know, under antitrust law, merging parties can show that there are efficiencies that will offset any anti competitive effects from a merger.

Those efficiencies have to be quantified.

And they have to be certain. And it has to be persuasive.

And, there, I would defer to the other panelists, and folks who, who specialize in merge review, but it is very difficult to imagine two merging parties, who could, who could satisfy the efficiency, tends to demonstrate, quantify all the efficiencies that are going to result from merging two very large organizations together. Certainly, that was not the case.

If life span culinary one, there’s also another applicable antitrust act. And I think it’s relevant to the assignment tenants, that, which is called the selling firm defense.

That, yes, there is a hospital that is in dire economic circumstances and would not be able to continue in existence.

But for the merger, then the selling firm defense can be invoked to offset any concerns about the effects. So there are antitrust doctrines that allow for mergers that would actually benefit consumers.

So I just wanted to be clear on that point.

Um, I want to talk a little bit about … dot org. I can save that for for Q&A, Tim.

I think one interesting takeaway from southern litigation, and there were two, there was a state court action and a federal action, or that the …

case really started many years ago and the early two thousands, where the Californian Attorney General attempted to enjoy a merger.

Acquisition of Center Alta Bates and Berkeley Summit Hospital in Oakland.

It failed, in part, because the prevailing geographic market methodology at that time resulted in a very significantly larger geographic market than the FTC sounds appropriate later.

So, so I think this other case illustrates kind of why, what can happen if you are not in a position to be sufficiently diligent about mergers.

And if these are allowed to obtain significant mark, our, what can happen down the road types of problems that you can deal with down the road.

I won’t get into the Sutter Health piece.

In obsessive detail, I will note that there were two cases and there were two different results in the state case, which I litigated we. The case settled right before the jury trial.

It had for $575 million and very comprehensive injunctive relief over the next 10 years, including a special monitor who’s overseeing compliance with the injunctive relief, which would prohibit some of the contracting practices. The resume kids, including S KT discuss, all are happening on tracking ….

Also price secrecy in the federal case went to trial or this year, and that resulted in a defense for workforce and there were some differences. In those cases.

The Federal case did not have a government enforcer, which I think illustrates in part, kind of how effective an attorney general private partnership can be in litigating a class.

It was a different class and involved insured entities, rather than self insured entities. It was a federal court, non state court. There’s some significant differences there. And there are some some, some some different legal theories and some difficult rulings and the Federal case.

But I think the real takeaway, to me, if this other case, to today’s discussion, is that it really began much earlier.

And it began at a time when a system in Northern California, which is the dominant system, first began amassing that market power, and it was interesting to see that, you know, decades later, we’re kind of dealing with it.

So with that, I know we’re short time, I will stop and happy to discuss further length anything.

Thank you, Chris. I think we’re going to open it up to all panelists now. I don’t see everybody’s face out there yet, but let me just invite anyone to sort of jump in.

We’ve, we’ve heard quite a smorgasbord of policy option’s both at the federal and state level.

And we’ve heard Ken’s, defensive consolidation, and the need to protect the hospital town from in some ways. Let me just ask anyone who wants to pitch in on with a vote for, for either a range of policy options or some, some way to deal with this, or whether we should just keep on keeping on. Anyone want to take on the?

The, the, the Triage of, of, Policy Options out there.

I’d be happy to you, but I have a question first, if that’s all right.


Kenya, you mentioned, and Chris, you both talked about the failing firm defense, which is, well, um, well regarded theory and antitrust is not very common in the hospital industry, but I guess my question can you mention a variety of facilities that are under a lot of financial stress Now.

I looked at one of them the Cleveland Clinic you mentioned has a large loss but I look at their Balance Sheet. It looks like they have $12 billion and long term investments.

During the pandemic. They got a $650 million credit line.

It had $447 million in investment income.

They turned to net profit during the pandemic with $352 million in Care Act funding.

They bought a hospital, and then they opened a private hospital in London targeting wealthy ex-pats from mainland and other countries.

So I guess my question is, yeah, you know, like, it sounds like Cleveland Clinic is having a bad year, but do you consider them financially distressed firm when they have $12 billion in long term assets to cushion many years of potential losses? Or?

I mean, the Cleveland Clinic is a very well operated financial organization, it has to be.

Because it’s a world renowned organization and its ambitions and approaches to care in terms of what it wants to do is non nationwide. It’s worldwide.

And it should be worldwide, because people from all over the world come to be taken care of. Cleveland Clinic. Its roots. It is regarded as one of the five hospitals, not in the United States, but in the world. So they’ve they’ve accumulated the resources that are necessary for them to operate at that level of ambition and capability.

The point is, is that, is that, for that organization, to be in a operating loss position is stunning, and it reflects the overall circumstances that we have right now, it doesn’t mean that they’re going to fail.

It doesn’t mean that they aren’t going to recover, but it’s an indication of where we are across the country right now, and how fragile our, our hospital systems are.

Now, you could, you could use that as an example, but you could go to other examples that have much worse balance sheets, and whose operating losses are putting those organizations in their communities at significant risk. And we can find those examples of those easily as well.

Well, let me ask.

That’s some of the specifics that that.

We’ve, we’ve heard some states and some of the states that are proposing regulatory entities to at least set price cap set price goals in the first instance.

But, many of their supporters see that as a first step on the road too rate, caps or rate regulations in some form or another.

Um, that obviously is going to be a blue, state, red state divide as well.

But let’s hear a little about the pluses and minuses of rates capping because at least some economists would say, If you have a durable monopoly, there should be rate regulation.

And our history on that score is not an encouraging one.

Any any thoughts on on the the drift towards towards rate caps?

This is Aaron. I know my camera isn’t working. So I will jump in with a at least a quick response to that question. I think a lot of economists would say, Yes, the first choice would be perfect. Competition, which we have already, we already don’t have. And so what we would have, instead, is sort of, what is our second best option, given that we have a marketplace that is not competitive.

And that, really, what we see is sort of maybe health care, particularly hospital care, is more like a, somebody that tends toward a natural monopoly, or unnatural do up only, where it’s more like a public utility. In that case, well, what is then the way to constrain monopolistic pricing?

And and a lot of economists have said yes, that in that scenario recapping what might be a preferable solution to rate setting. So what’s the difference? So rate setting is where the government, whether it’s a state government or the federal government, rolls up the sleeves and actually sets the price for every item and service. That’s offered And you can think of Medicare fee for service being an example of that.

We had states that did that back in the eighties and maybe early nineties and it’s really, really difficult to do.

It’s extremely, It’s it’s hard for a government to do that really well, particularly at the state level.

So what we haven’t said now is this idea of a rate cap, which is the idea that really, whether it’s in in network or out of network or some combination prices shouldn’t exceed a certain yes, benchmark, whether it is a multiple of the Medicare price or whether it is something pegged to the average negotiated rate in that market.

And so the idea is that you really are just targeting what we’re really worried about. Are not. The struggling hospitals are the places that have no competition, though are worried about are the sort of very large, dominant health systems that are using their monopoly power to extract, extract higher and higher prices. And that have no constraints, basically, because every health plan needs them in their network.

And so the idea here would just be to cap those prices and say everyone has to still negotiate. There’s still competition below the cap. But we’re just gonna put some downward pressure on the very tippy top, because it’s that Mark monopoly dynamic. And that there have been several models again, that you don’t have an example of this being implemented. But we do have some models where that is actually quite effective at generating some savings. Even if you just kept out of network prices.

It again, might force everyone back to the negotiating table, to be able to negotiate better in network rates. And again, and again, we’re really only targeting those top of the market prices and allowing competition to still exists beneath the cap so that that’s the plus on the side of the ledger.

The minus would be, there’s always a fear that there’s going to, it’s going to become what’s called a magnetic ceiling, and that once a top prizes named, that even the smaller, more value based, providers might gravitate to that top price, if they can, But there’s my question is: if they could already get that price in the market, why aren’t they getting it now?

Yeah, I think there’s that question.

Again, I’m guessing you want to take issue with arens, kinder, gentler price regulation.

Who are you asking?

I can see you.

Then, I want to take issue with, I’ve never seen price regulation work, and I’ve been in the industry for really, really long time.

It doesn’t work from indicated.

It requires a regulatory body to operate it at the highest level of certification, generally just just just hasn It isn’t what’s happening.

And it makes it very difficult for, for hospitals to operate in an uncredited way to respond to the need changes in their community.

And, you know, and I would I would say something, which I would imagine everybody on this webinar would disagree with, I don’t think that consumers like it.

I don’t think that comes right down to it. Most consumers don’t. That’s not how they see what America is. They don’t know. When you talk about the important industries in America, there’s no more important industry in America, in the healthcare industry.

And people talk about, they complain about a higher price, but when they, when they want, what they want, and when they’re sick, When they’re sick, they want to be there.

So somebody in Maryland, who lives, you know 90 miles away from Hopkins, but they get our Hopkinsville level disease, they want to go to hop.

And they don’t want anybody in government telling them where they go, and who they can be, and how they can be cared for at that time. And that’s how the American public feel about it, without a doubt.

So write something revolutionary I actually agree with, can I, the history of rate regulation? I know it’s shocking considering my last question, I just, we just blew our audience as minds.

But the history of rate regulation at the Global Budget State level, it didn’t work well, that didn’t work in the eighties, Denmark in the nineties. And most of the states shut that.

I think Chris made a really important comment earlier where he said that competition is great, and regulation doesn’t capture competition like, it doesn’t replace competition, and there are non price aspects of competition.

And so I think way if we skip and go straight to rate regulation, we ignore the whole issue, which is that we need to figure out how to restore our competition dynamic market.

Tim, can pose a question on that.

actually that picks up on something that Brian had said, Brian had flagged removing, I can’t make peace with the lack of competition, the reasons you just articulated you to flag the possibility of removing barriers to entry to the certificate of … laws, I wonder if anyone on the panel has any thoughts about other barriers to entry and how they might be removed. So, even in markets that are concentrated and we cannot scrambled egg, we can induce new entrants into the market.

I’ve written about the physician controlled hospital issue, which is tricky one, because there’s the risk of cherry picking and all the all those things that could occur. But there is some argument that that at least that could provide a little bit of a relief valve in the market.

And going along with what Brian just said, as one who is notoriously skeptical of regarding certificates of Public advantage, that that model of regulation is, is not one I would endorse either.

Well, the Code, the co-pays have developed in the Red States because.

Strong hostility in certain circumstances to Washington.

You know, the COPPA in Albany, Georgia, Tennessee, Virginia, I mean, those, states just didn’t like the answer to that.

So that’s where, that’s where the problem, and I know the FTC is, is very disagreeable about the copas, but, but if the FTC doesn’t pay more, no reasonable approach to, to individual situation, then they’re going to, they’re going to get cope at all over.

That’s my opinion, though.

No, I think I think it’s really hard to justify certificate of need at this point.

It really is, and I agree with Brian’s perspective on it.

Now, you know, if you’re, if you’re a well run health care organization, and you have a lot of confidence in what you do, and you think you’ve got good doctors and great relationships with your patients, and what do you have to fear about, about certificate of need?

There’s one thing I didn’t agree with, Brian was the Physician Note hospitals, which, which I think is, you know, all you have to do, is read a little bit to go on, and you’ll know what the problem with that.

Well, as the moderator and bartender of this organization, I’m going to have to declare a closing time. I want to thank everybody. And.

If we can, I think it’s time for me to turn it over to you, to the controllers here for some final final thank yous, but thank you to all of you for your for your interesting and provocative analyzes and we’ll see where we go from here.

OK, yes, OK, thanks Tom.

At this time, please take the time to complete a brief evaluation survey that you will receive.

Immediately after the broadcast, and as well as the e-mail later, today, please join us next Wednesday, October 26 for our briefing, Rebuilding Trust, and Public Health Messaging, Um, a recording of this webinar, and additional materials will be available on the Alliance website.

This officially concludes our task today explore the market competition, ecosystem, Lessons Learned, and Next steps. Again, thank you to Aaron, Brian, Kenneth, Katie, Chris, and Tom. Thank you.

Thank you. Thank you. Thank you.