You're Probably Getting Screwed by Hospital Monopolies
But your state can do something about it!
Welcome to You’re Probably Getting Screwed, a weekly newsletter and video series from J.D. Scholten and Justin Stofferahn about the Second Gilded Age and the ways economic concentration is putting politics and profits over working people.
A new law in Indiana is going into effect next week that will help the state crack down on hospital consolidation, a key driver of our ridiculously expensive healthcare system. In fact, more and more states - red, blue, and purple - are stepping up to take on hospital monopolies.
Since 1998 there have been over 2,000 hospital mergers across the United States. Today around 90 percent of US metro areas have highly concentrated hospital markets and in about fifth of those markets patients are being served by just one hospital system. In rural communities this consolidation is even more acute as more than 100 rural hospitals have closed since 2013 and in countless others services have been slashed.
For all the focus we put on the cost of healthcare and prescription drugs (and rightly so) hospitals represent the single largest slice of spending in healthcare, accounting for a third of our healthcare dollar or over $1.4 trillion! Reams of research has found that hospital mergers drive up these costs. For example, in already concentrated markets (reminder 90% of metro areas are highly concentrated), a hospital merger commonly raises prices by 20 to 30 percent.
The hospital merger frenzy has left much of the country dominated by giant health conglomerates. Community hospitals that are part of a larger health system increased from 53% in 2005 to 68% in 2022. Health systems have not only been gobbling up hospitals but are also acquiring independent physicians and other providers. Nearly 80 percent of physicians today are employed by hospitals and health systems compared to 26 percent in 2012. Over the last decade the local doctor has nearly gone extinct and it is no wonder why hospitals are scooping them up. Outpatient hospital costs have grown four times faster than what doctors charge.
Beyond costs, hospital monopolies are bad for workers and hollow out communities. Studies have shown that wages for nurses, pharmacy workers and non-medical hospital workers drop after a merger by 4 to 7 percent. The increase costs that hospital mergers create can also lead to layoffs in other industries. In addition to workers, communities are impacted. The Government Accountability Office found that more than half of rural counties lacked hospital-based obstetric services in 2018. Closures like this, both in rural and urban communities, are often the result of a health system acquiring market share and then using it to route patients to a flagship hospital campus.
Yet despite the destruction caused by the long-running monopolization of our hospitals and local doctors, between 2002 and 2020 the Federal Trade Commission took enforcement action against less than 1% of hospital mergers. Part of this is changing with a more aggressive FTC headed by Lina Khan, but the structure of our current hospital system also presents challenges. As you can see from the list below, many giant health systems, some of which generate more revenue than leading tech companies, are “nonprofits” which creates limits on the FTC’s authority. This is why states are so important and stepping up.
The new law in Indiana will require 90 days notice of a proposed healthcare merger. Laws like this are referred to as mini-HSR laws, after the federal Hart-Scott-Rodino Act that requires companies to provide notice of some proposed mergers to the FTC and Department of Justice (DOJ). Many of these mini-HSR laws apply to smaller deals that fall below the HSR threshold of nearly $120 million. In addition to enhanced notice, some states have established public interest standards for a merger that are broader than antitrust law. These laws not only sound good, they work!
Rhode Island used its public interest review to block a proposed merger between Lifespan and Care New England, which would have controlled 70% of the state’s hospital market. In Minnesota, Sanford Health and Fairview Health Services abandoned their mega-merger after the legislature passed tougher oversight, including a public interest standard. In North Carolina cities and counties have filed an antitrust lawsuit related to HCA Healthcare’s 2019 acquisition of Mission Health.
Hospital consolidation has driven up the cost of healthcare, harmed communities, healthcare workers and driven independent providers towards extinction, but none of that is inevitable or necessary and your state legislator can do something about it. Tell them to do so if you haven’t already.
YOU’RE PROBABLY (ALSO) GETTING SCREWED BY:
House GOP Budget
Republicans in the US House of Representatives have unveiled a budget that would dramatically slash funding for the Department of Justice, including the Antitrust Division which has been working tirelessly and with less personnel than it had decades ago to protect Americans from corporate monopolies.
PBMs
NFL Owners
Last week we covered a new way NFL owners are trying to screw us, but they are also using more traditional methods in Kansas City where the Chiefs are threatening to leave so taxpayers (or more appropriately the politicians representing taxpayers) will hand over gobs of money to build a new stadium.
Fanatics
Did you know there is a baseball card monopoly? The American Prospect has a fantastic write-up of how Fanatics has cornered not only trading cards, but all other aspects of sports merchandise. As Luke Goldstein writes in the piece, “If you’re a sports fan in America, you can’t avoid Fanatics.”
Oh did we mention PBMs already?
In fairness who among us hasn’t overcharged for a cancer drug by 885 percent? Sarcasm aside, the graph below is from a very comprehensive piece in the New York Times on the way PBMs ruin everything.
SOME GOOD NEWS:
DOJ & USDA taking on Big Ag
USDA Secretary Tom Vilsack and Assistant Attorney General Jonathan Kanter spoke this week about the actions their agencies are taking to protect competition in agriculture and rural communities. This includes a new team the DOJ will be putting together out of its Chicago office to focus on issues in agriculture. The DOJ will be using increased funding from Congress to do this, which helps underscore how damaging the House GOP proposal mentioned above is.
I would highly recommend checking out Kanter’s opening remarks at this event hosted by the Center for American Progress. “Small farmers does not mean small people or small dreams.”
SCOTUS does something good!
The Supreme Court ruled 5-4 today to block a nationwide settlement with Purdue Pharma for its role in fueling the opioid crisis. The uncertainty this creates for families impacted by opioids and a part of this settlement is not good, but the reason the court ruled in this fashion is Purdue’s bankruptcy reorganization would have created a legal shield around the Sackler family.
BEFORE YOU GO
Before you go, I need two things from you: 1) if you like something, please share it on social media or the next time you have coffee with a friend. 2) Ideas, if you have any ideas for future newsletter content please comment below. Thank you.
Break ‘Em Up,
Justin Stofferahn