Issues & Insights

Look Who’s Fighting Against Hospital Mergers

The most vexing thing about the Obamacare debate so many years ago was the emphasis on coverage. The administration rarely talked about reducing the cost of health care – which is the real problem – rather they pushed how much everyone needed insurance coverage. This, very much like the current insistence for “free college,” has moved the debate in the wrong direction.

No one would need insurance for day-to-day care if it were affordable: check-ups, basic prescriptions, simple medical devices, and so forth. People should only need insurance in the event of a catastrophe, just like with auto insurance – we don’t ding our insurance every time we get an oil change. But the third-party payer system has contributed to health care costs ballooning so much that patients can’t get even basic treatment without insurance. 

And the people who have benefited the most from this are not patients but … insurance companies themselves, who have seen record profits under Obamacare, which makes one wonder who that particular agenda was really supposed to help. Obamacare has not made health care cheaper; it’s made insurance companies richer. (And the dark lining on that dark cloud is that it’s also driving doctors to leave medicine.) 

So, in the effort for the private sector to find cost-savings to keep doctors in practice and hospitals open, many hospitals are merging and consolidating to reduce costs. One analysis of this practice, studying mergers between 2009 and 2014, showed that merging hospitals’ annual operating expenses went down 2.5% and drove quality improvements through standardization, investments to upgrade facilities, and services at acquired hospitals. Mergers typically expand the scope of services available to patients, the study continued, and “build upon existing institutional strengths to provide more comprehensive and efficient care.”

This practice is hardly the silver bullet needed to make American health care perfect – but every bit helps. 

Alas this practice tends to not help insurance companies, who don’t benefit from hospitals saving money. Furthermore, the larger a system of hospitals becomes, the stronger of a negotiation position they develop for working out costs with said insurance companies: negotiating prices with one united counter-party is worse for a large insurance company than lots of little ones it can bully. 

So some insurance companies are digging in their heels to prevent any mergers, and relying on the Golden Rule – that whoever has the gold makes the rules – they have mounted a public affairs and lobbying campaign. It’s depressingly more cost effective for insurance companies to spend millions of dollars to maintain the status quo rather than billions to make health care more affordable and accessible by their customers.

And the tip of this particular spear is the Physicians Advocacy Institute (PAI), a leading voice for fighting hospital mergers, no matter the circumstances.

PAI is a nonprofit organization originally (and ironically) started with funds from class-action settlements against for-profit health insurers. The group’s board is comprised of executives from nine state medical associations, which financially rely on donations from the very insurers who initially funded PAI through settlements, as well as other ties to anti-consolidation interests. This board is comprised of heads of groups that take millions in Blue Cross Blue Shield and UnitedHealth funds from all across the country.

With so much money on the line, the health care system is a murky pit of individual and merging interests. Groups like PAI are a unique danger to the public debate surrounding high medical costs: they claim to advocate for patients but are dependent on the very private insurers who are driving up health care costs. Their name is something from George Orwell – though not quite as bad as the Democrats’ recent, horrifying, totalitarian “For the People” legislation. 

When companies like Blue Cross Blue Shield spread money around to non-profits with positive sounding names, they get a branded entity that doesn’t carry the stench of industry to advocate on their behalf. Insurance companies make easy bad guys for reporters, Hollywood screenwriters, or the parade of late-night Jon Stewart wannabes. But physician advocates – those sound like good guys! 

Of course, insurers don’t want to see pro-patient efforts, like hospital mergers, enacted, as they would see a direct hit to their financial bottom line.

Insurance companies have made off like proverbial bandits in the last 10 years, getting a big boost from Obamacare. They’re flexing their legislative muscle to make sure it stays that way. A public interested in better medicine, healthier patients, and stronger hospitals would be well advised not to fall for this kind of inside-the-Beltway sleight of hand.

Jared Whitley is a long-time DC politico who has also lived in Dubai and Berlin. He has an MBA from Hult International Business School.

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1 comment

  • My GP is independent of Medicare/Medicaid and the local hospital that has bought up practices in the area. I pay a yearly retainer that covers all my visits. I have emailed about issues and avoided office visits when a resolution was obvious. When the consumer can make informed decisions about both the cost and the payment for medical services, the costs will come down.

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