Antitrust's Healthcare Conundrum: Cross-Market Mergers and the Rise of System Power

King, Jaime S.; Montague, Alexandra D.; Arnold, Daniel; Greaney, Thomas L.

doi:10.2139/ssrn.4037747

Cited by 3 publications

(8 citation statements)

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“…Our review here is brief; readers can read more detailed summaries elsewhere. 82,83 Lewis and Pflum studied 81 acquisitions of solo hospitals by an "outof-market" system (i.e., a system that had no market overlap for 45 miles but may have been within the same state) over a ten-year period (2000-2010). 84 They found that, postacquisition, the prices charged by the target hospital rose 17% higher than a control group.…”

Section: Cross-market Mergersmentioning

confidence: 99%

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Burns

Pauly

2023

Milbank Quarterly

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Hospital executives posit a number of rationales for system mergers which lack any basis in academic evidence. Decades of academic research question whether system combinations confer public benefits. Antitrust authorities need to continue to closely scrutinize these transactions. Recently, mergers of hospital systems that span different geographic markets are on the rise. Economists have alerted policymakers about the potential impacts such cross‐market mergers may have on hospital prices. We suggest there are other reasons for concern that scholars have not often confonted. Cross‐market mergers may be conducted for purely self‐serving reasons of organizational growth that increases executive compensation. Combinations of sellers should have clear advantages to consumers. System executives and their boards should bear the burden of proof. Federal regulators and state attorney generals should be cognizant that rationales for cross‐market systems advanced by merging parties are unlikely to be operative or dominant in merger decision making. Policymakers should be careful about passing legislation that encourages hospitals to consolidate. Context There is a growing trend of combinations among hospital systems that operate in different geographic markets known as cross‐market mergers. Economists have analyzed these broader systems in terms of their anticompetitive behavior and pricing power over insurers. This paper evaluates the benefits advanced by these new hospital systems that speak to a different set of issues not usually studied: increased efficiencies, new capabilities, operating synergies, and addressing health inequities. The paper thus “looks under the hood” of these emerging, cross‐market systems to assess what value they might bestow and upon whom. Methods The paper examines recently announced cross‐market mergers in terms of their supposed benefits, as expressed by the systems’ executives as well as by industry consultants. These presumed benefits are then evaluated against existing evidence regarding hospital system outcomes. Findings Advocates of cross‐market hospital mergers cite a host of benefits. Research suggests these benefits are nonexistent. Additional evidence suggests other motives may be at play in the formation of cross‐market mergers that have nothing to do with efficiencies, synergies, or community benefits. Instead these mergers may be self‐serving efforts by system chief executive officers (CEOs) to boost their compensation. Conclusions Cross‐market hospital mergers may yield no benefits to the hospitals involved or the communities in which they operate. The boards of hospital systems that engage in these cross‐market mergers need to exercise greater diligence over the actions of their CEOs.

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Section: Cross-market Mergersmentioning

confidence: 99%

“…Different studies measure different types of cross‐market activity, making it difficult to draw firm generalizations; nevertheless, the results from three of these studies are fairly consistent. Our review here is brief; readers can read more detailed summaries elsewhere 82,83 …”

Section: Regional System Formations: An Evidence‐based Assessment Of ...mentioning

confidence: 99%

Big Med's Spread

Burns

Pauly

2023

Milbank Quarterly

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“…Furthermore, hospitals may transfer bargaining knowledge and skills, thus leading to better negotiating power and ultimately, higher prices-regardless of whether the merger is within-market or cross-market. 5 The Rising Prominence of Cross-Market Mergers…”

Section: The Uniqueness Of Cross-market Mergersmentioning

confidence: 99%

“…These insurers may include large, self-insured employers, whose members may require the geographic breadth of a national network of clinicians and hospitals. Furthermore, hospitals may transfer bargaining knowledge and skills, thus leading to better negotiating power and ultimately, higher prices—regardless of whether the merger is within-market or cross-market …”

Section: The Uniqueness Of Cross-market Mergersmentioning

confidence: 99%

Hospital Consolidation: The Rise of Geographically Distant Mergers

Navathe

Connolly

2023

JAMA

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“…Most healthcare provider markets across the United States are now considered highly concentrated ( 1 ), and a majority of hospitals are associated with increasingly powerful health systems ( 2 ). Healthcare experts consistently find that highly concentrated healthcare provider markets are associated with higher prices, mixed quality outcomes, and reduced access to healthcare services ( 3 ), while other studies have shown that health systems with substantial market power can wield it across markets to engage in anticompetitive practices ( 4 ).…”

Section: Introductionmentioning

confidence: 99%

Considerations for state-imposed conditions on healthcare provider transactions

Montague,

Davison,

Gudiksen

et al. 2023

Front. Public Health

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The widespread consolidation of health systems, hospitals, and physicians has contributed to the high price of healthcare across the United States. While federal antitrust enforcers continue to play an important role in overseeing large mergers, acquisitions, and other consolidating transactions of major healthcare providers, state oversight over healthcare markets is essential to slow consolidation more broadly and address market failures across the country. State laws govern the scope of authority held by state attorneys general and other state agencies to receive notice of, review, and approve, conditionally approve, or block healthcare provider transactions, which can significantly impact the breadth and content of oversight. While blocking potentially anticompetitive transactions can help states maintain any competitive forces that remain in the market, in some situations, approving a transaction with conditions may be the best path forward. Applying conditions to transactions may allow state officials to oversee and govern the behavior of providers post-transaction while states pursue other legislative fixes. Although the use of conditions is a relatively common practice at the state level, little research has been done to explore their use among states. Following a search in all 50 states, this paper examines decisions from state officials imposing conditions intended to address the impacts of transactions on healthcare price, access, and quality and provides recommendations for the effective use of conditions moving forward.

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Antitrust's Healthcare Conundrum: Cross-Market Mergers and the Rise of System Power

Cited by 3 publications

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Hospital Consolidation: The Rise of Geographically Distant Mergers

Considerations for state-imposed conditions on healthcare provider transactions

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