Policy and Regulation News

AHIP Warns Congress of High Costs Tied to Provider Consolidation

AHIP views provider consolidation as detrimental to improving care quality, delivery, and cost.

Payers oppose provider consolidation

Source: AHIP

By Kyle Murphy, PhD

- Mergers and acquisitions are commonplace in healthcare, but leading payers in the United States claim provider consolidation is costing consumers.

In testimony submitted to the Senate Subcommittee on Antitrust, Competition Policy, and Consumer Rights for a hearing on “Competitive Implications of Vertical Consolidation in the Healthcare Industry,” America’s Health Insurance Plans (AHIP) recommended five actions federal policymakers to counter the anticompetitive effects of provider consolidation.

“In spite of the promises that accompanied many of these transactions, the result over time was inevitable: Higher prices and lower incentives to compete in other areas such as quality,” the organization stated based on a literature review that showed negative correlations between vertical provider consolidation and prices for services.

“All consolidation, whether vertical or horizontal, must be assessed individually based on its own impact on competition,” AHIP argued. “Some vertical consolidation benefits consumers by making possible new products, more efficient approaches, and other benefits. Unfortunately, much vertical provider consolidation, at this point, has a demonstrated record of leading to higher prices and not leading to benefits for consumers.”

The organization offered a handful of recommendations to “mitigate the harm” that provider consolidation continues to impose as well as redress the harm already done by approved mergers and consolidations.

The first centers on giving the Federal Trade Commission (FTC) and the Department of Justice (DoJ) the ability to address anticompetitive consolidation. “The best way to protect competition is to prevent its elimination in the first place. The FTC and the DOJ should have both the resources and the mandate to challenge vertical anticompetitive provider consolidation,” AHIP noted.

The second calls for a retrospective review of vertical provider consolidation and possible remediation efforts. “We agree that the time is ripe for another retrospective review by the FTC. Given the increasing role of vertical provider consolidation, the scope of the FTC’s review should include a focus on such consolidation,” the organization added.

For its third recommendation, AHIP seeks collaboration between the Centers for Medicare & Medicaid Services (CMS) and FTC and DoJ to review payment and other policies and their unintended effect on provider consolidation.

“The federal government’s actions are not limited to those of a market regulator. It is also a market participant through Medicare, Medicaid, and other programs,” AHIP maintained. “In many ways, CMS is the most significant market participant. The policies that apply to these programs have impacts that ripple throughout markets.”

The fourth recommendation would build on the third to ensure that CMS policies do not harm competition.

Lastly, AHIP recommends that federal health programs and the individual marketplace support innovations to traditional care delivery — that is, increased use of telemedicine, retail clinics and urgent care facilities, home health, ambulatory service centers, and non-physicians.

“Health insurance providers, while operating in competitive markets, are working hard to ensure that their enrollees receive high-quality health care at competitive prices. Vigorous competition in hospital and physician markets is crucial to promoting a fair system that serves the best interests of consumers, but is undermined by anticompetitive vertical provider consolidation,” AHIP concluded.

AHIP’s recommendations come more than six months after the American Medical Association (AMA) publicized a study of health payer competition finding that decreased competition in specific markets led to fewer options and higher prices for consumers.

AMA found that “the majority of health insurance markets in the United States are highly concentrated.”

“Coupled with evidence on their anticompetitive behavior,” the report’s authors noted, “this strongly suggests that health insurers are exercising market power in many parts of the country and, in turn, causing competitive harm to consumers and providers of care.”

Should FTC and DoJ conduct an extensive review of healthcare mergers and acquisitions, providers won’t be the only organizations to go under the microscope.