Health plans

AHA to Blame Health Plan Costs in Letter to Antitrust Regulators

Dive brief:

  • The country’s most powerful hospital lobby is stepping up its defense of hospital mergers as the Biden administration aims to crack down on supplier consolidation.
  • The American Hospital Association on Wednesday sent a letter to senior officials in the White House, HHS, Department of Justice and Federal Trade Commission defending mergers and acquisitions in the healthcare system and attempting to shift the focus Washington’s growing antitrust from vendors to commercial health plans.
  • The letter included an updated AHA-funded study on the benefits of hospital mergers, which had previously been criticized by outside experts for hand-picked data, among other methodological weaknesses.

Dive overview:

In an executive order signed in July, President Joe Biden called on regulators to vigorously enforce antitrust laws, including in healthcare, as hospital mergers and acquisitions continue at a rapid pace. The ordinance came shortly after the FTC announced plans to prioritize healthcare in its enforcement strategy over the next decade, as research indicates a lack of competition in the industry. led to price increases without improving the quality of care.

“Too many hospital mergers mean higher prices and less care for those patients who need it most,” said Lindsay Kryzak, FTC director of public affairs, in a statement earlier this month. Kryzak’s remarks followed a U.S. District Court ruling to grant a preliminary injunction against Hackensack Meridian Health’s proposed acquisition of the New Jersey system from close competitor Englewood Healthcare Foundation, a deal to which the FTC s ‘is opposite.

“The court has paused this merger, which the FTC says is illegal. Hospital executives preparing merger plans should take note,” Kryzak said.

The recent wave of merger and acquisition cases prompted the FTC earlier this month to warn organizations seeking to merge that the agency would be reviewing the deals in retrospect, which could result in the unwinding of completed mergers. Regulators forced hospitals to unwind previously made deals, including ProMedica’s acquisition of a Toledo, Ohio hospital in 2015 following a five-year court battle.

The Biden administration’s renewed antitrust efforts have prompted a response from industry groups, as shown in the AHA’s new letter to policy and regulatory officials. AHA CEO Rick Pollack called Kryzak’s remarks “unfortunate” in the letter because “most of the proposed hospital mergers present no competition concerns and offer real benefits to these communities.”

As evidence, the AHA sent regulators a study conducted by Charles River Associates, first published in 2019 before being updated to include more recent data in August. The study found that contemporary hospital mergers result in cost savings and quality improvements, without a corresponding increase in revenues consistent with the acquisition of market power.

The 2019 version showed that the acquired hospitals achieved a reduction of more than 2% in annual operating expenses, while the 2021 version saw a reduction of more than 3%. Both said the drop in costs was linked to a statistically significant drop in inpatient readmission and mortality rates.

However, this study contradicts a mountain of research concluding that prices tend to be higher in more consolidated markets and that suppliers with a larger market share see higher trade profit margins, resulting in higher costs per landfill. . The burden of these higher costs is often borne by consumers in the form of higher premiums and reimbursable expenses.

In its letter, however, AHA maintained that the cost savings resulting from the mergers are passed on to the plans, but it is not clear whether they reach consumers. The trade association, which represents some 5,000 hospitals, criticized antitrust agencies for strictly scrutinizing hospital mergers and avoiding the commercial health insurance sector, saying they receive uneven attention.

Payers appear to “have avoided much of the antitrust enforcement and regulatory attention provided by this collection of federal agencies,” Pollack said.

Hospital mergers have increased over the past decade. The size of the deal was even accelerated by the pandemic, as many small facilities, faced with the risk of shutting down as volumes collapsed, had no choice but to bundle with larger systems to avoid to close their doors.

In the first half of 2021, transaction revenue stood at $ 17.2 billion across 27 transactions, according to a report by Kaufman Hall. In the same period last year, revenue was $ 17 billion from 43 transactions.