Our collective experience over the last two years fighting the novel coronavirus has demonstrated the importance of access to healthcare facilities.
Society was disrupted in unprecedented ways to ensure an adequate supply of hospital beds would remain available for those who needed care. Months of lockdowns, spurred by “15 days to flatten the curve,” were carried out with the explicit intent of keeping COVID-19 cases at a level that would allow for adequate space in intensive care units and to ensure patients suffering from severe cases of the virus had a place to be treated.
But lurking in the background were other threats to healthcare access that were overlooked during this time and that persist to this day. As hospital ships arrived in American ports and convention centers were converted into field hospitals, dozens of other healthcare facilities across the country closed. This focus on maintaining short term access to healthcare, while critical, sometimes came at the expense of the long-term effort to maintain healthcare access for millions of Americans.
While some of these closures were due to the unprecedented financial strains placed upon hospitals by COVID-19; from delayed elective surgeries which are a profit center for hospitals, to labor shortages and astronomical increases in the price of personal protective equipment (PPE), the financial troubles that many of these facilities face pre-date the coronavirus pandemic. Private and public money for hospitals has been drastically reduced in recent years and current trends in the insurance marketplace have resulted in a handful of large companies with a firm grip on the insurance industry, resulting in higher premiums for consumers and lower reimbursement rates for hospitals.
Accordingly, hospitals have started to adapt. Mergers between healthcare facilities have been one of the most popular ways to adjust to broader trends in the healthcare industry. In 2017 alone there were over 100 merger and acquisition transactions, the highest number in recent history, demonstrating that the healthcare industry believes this is the best way to keep up with the ever-changing advancements and needs of the medical community.
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There are myriad reasons why such mergers make sense for hospitals. Cost reductions through the streamlining of administrative functions allow for reduced operating costs that can be reinvested in patient care. Acquisitions of smaller facilities oftentimes opens up access to new sources of capital, providing hospitals an opportunity to invest in upgrading facilities and services. This improves healthcare outcomes and allowing for greater efficiencies which can help hospitals obtain additional cost savings.
Unfortunately, it appears that the Biden Administration may be taking steps to close the door on mergers for healthcare facilities moving forward. The Federal Trade Commission (FTC) has expressed broad skepticism towards mergers in general and it appears that hospitals may become political collateral damage in this shift.
The FTC’s position on this matter is problematic for several reasons. The agency is relying on outdated and inaccurate information and many recent commentaries asserting that hospital mergers raise prices cite studies from as far back as the 1990s. The problem is, much has changed in the medical industry specifically and the economy more broadly since then.
The efficiencies and new technologies the invention of the internet brought with it is just one example of how medicine has been revolutionized. Technologies that have streamlined and improved healthcare, such as telemedicine and electronic medical records, were unheard of at that time and are indicative of the kinds of radical changes the healthcare industry has undergone in just the last decade.
Furthermore, one of the main criteria upon which the FTC uses to judge mergers is to determine if it is in the “public interest” – or to ask if such moves will harm consumers, in lay man’s terms. Recent studies have found that revenue per admission at hospitals after they have been acquired declined relative to non-merging hospitals by 3.7%, implying that realized savings are being passed on to consumers. Other key indicators of quality of care such as readmission rates and readmission/mortality outcome measures also show improvements. Such positive outcomes bolster the argument that such mergers benefit consumers in the long run.
In an overzealous effort to protect consumers, the FTC may very well unintentionally harm many of them. Preventing hospital mergers not only raises costs and adversely impacts patient outcomes, but it may also limit access to care for some of America’s most vulnerable populations in underserved rural and inner-city communities. In light of these facts, hopefully regulators at the FTC will reconsider their approach.
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