New evidence on the impacts of cross-market hospital mergers on commercial prices and measures of quality.

OBJECTIVE: To examine the impact of "cross-market" hospital mergers on prices and quality and the extent to which serial acquisitions contribute to any measured effects. DATA SOURCES: 2009-2017 commercial claims from the Health Care Cost Institute (HCCI) and quality measures from Hospital Compare. STUDY DESIGN: Event study models in which the treated group consisted of hospitals that acquired hospitals further than 50 miles, and the control group was hospitals that were not part of any merger activity (as a target or acquirer) during the study period. DATA EXTRACTION METHODS: We extracted data for 214 treated hospitals and 955 control hospitals. PRINCIPAL FINDINGS: Six years after acquisition, cross-market hospital mergers had increased acquirer prices by 12.9% (CI: 0.6%-26.6%) relative to control hospitals, but had no discernible impact on mortality and readmission rates for heart failure, heart attacks and pneumonia. For serial acquirers, the price effect increased to 16.3% (CI: 4.8%-29.1%). For all acquisitions, the price effect was 21.8% (CI: 4.6%-41.7%) when the target's market share was greater than the acquirer's market share versus 9.7% (CI: -0.5% to 20.9%) when the opposite was true. The magnitude of the price effect was similar for out-of-state and in-state cross-market mergers. CONCLUSIONS: Additional evidence on the price and quality effects of cross-market mergers is needed at a time when over half of recent hospital mergers have been cross-market. To date, no hospital mergers have been challenged by the Federal Trade Commission on cross-market grounds. Our study is the third to find a positive price effect associated with cross-market mergers and the first to show no quality effect and how serial acquisitions contribute to the price effect. More research is needed to identify the mechanism behind the price effects we observe and analyze price effect heterogeneity.

Private Equity-Acquired Physician Practices And Market Penetration Increased Substantially, 2012-21.

Private equity (PE) firms have been acquiring physician practices at an increasing rate, raising concerns about such firms' penetration at the physician level into local markets and the impact on health care quality and prices. However, limited knowledge exists about the extent of PE firms' control in local markets. By linking data on PE acquisitions to physician data and using full-time-equivalent physicians as the base of assessment, we estimated the local market share of each PE firm within ten physician specialties at the Metropolitan Statistical Area (MSA) level. PE-acquired physician practice sites increased from 816 across 119 MSAs in 2012 to 5,779 across 307 MSAs in 2021. Single PE firms had significant market share, exceeding 30 percent in 108 MSA specialty markets and exceeding 50 percent in 50 of those markets. The findings raise concerns about competition and call for closer scrutiny by the Federal Trade Commission, state regulators, and policy makers.

Association Between a Capitated, Low-cost, County-Based Public Health Insurance Option and Affordable Care Act Premium Growth in California.

Importance: Empirical evidence is needed on how a capitated, risk-based county plan performs as a viable public option in the Affordable Care Act (ACA) Marketplace in California. Objective: To estimate whether LA Care-a capitated, county-based public option and California's largest public insurer-was associated with health insurance premium growth in the Los Angeles (LA) regions of Covered California (CC), the ACA exchange in California. Design, Setting, and Participants: This economic evaluation used ACA silver plan premium data within the 19 CC regions. Difference-in-differences and event study models used data on plan-level premiums from Health Insurance Exchange Compare for years 2014 to 2022 to estimate the association between LA Care and ACA premium growth in LA. Exposures: The intervention was LA Care becoming the lowest-cost health plan on the ACA exchange in 2018. The treatment group included the East and West LA regions, and the control group included the remaining 17 CC regions. Main Outcomes and Measures: The main outcome variable was annual premium growth of plans on CC from 2014 to 2022. Results: Using 504 plan-level observations for 2014 to 2022, ACA premium growth in LA declined by 4.8% after LA Care became the lowest-cost health plan on the exchange in 2018 (coefficient estimate, -0.048; SE, 0.022; 95% CI, -0.093 to -0.002). Savings due to lower premium growth from 2019 to 2022 were calculated to be $345 million, with approximately 70% of the savings ($242 million) going to the federal government. Conclusions and Relevance: In this economic evaluation, LA Care was associated with lower premium growth of other health insurance plans in the LA regions of CC, with the majority of savings going to the federal government. California could have captured these savings if it had applied for and received a State Innovation Waiver under section 1332 of the ACA. LA Care may be a viable public option with the potential to be expanded across California through the state's 16 other county-based health plans.

The Better Care Plan: a blueprint for improving America's healthcare system.

The United States falls far short of its potential for delivering care that is effective, efficient, safe, timely, patient-centered, and equitable. We put forward the Better Care Plan, an overarching blueprint to address the flaws in our current system. The plan calls for continuously improving care, moving all payers to risk-adjusted prospective payment, and creating national entities for collecting, analyzing, and reporting patient safety and quality-of-care outcomes data. A number of recommendations are made to achieve these goals.

The Rise Of Cross-Market Hospital Systems And Their Market Power In The US.

Although hospital consolidation within markets has been well documented, consolidation across markets has not, even though economic theory predicts-and evidence is emerging-that cross-market hospital systems raise prices by exerting market power across markets when negotiating with common customers (primarily insurers). This study analyzes hospital systems using the American Hospital Association Annual Survey Database and defines hospital geographic markets as commuting zones that link workers to places of employment. The share of community hospitals in the US that were part of hospital systems increased from 10 percent in 1970 to 67 percent in 2019, resulting in 3,436 hospitals within 368 systems in 2019. Of these systems, 216 (59 percent) owned hospitals in multiple commuting zones, in part because 55 percent of the 1,500 hospitals targeted for a merger or acquisition between 2010 and 2019 were located in a different commuting zone than the acquirer. Based on market-power differences among hospitals in systems, the number of systems in urban commuting zones that could potentially exert enhanced cross-market power increased from thirty-seven systems in 2009 to fifty-seven systems in 2019, an increase of 54 percent. The increase in cross-market hospital systems warrants concern and scrutiny because of the potential anticompetitive impact of hospital systems exerting market power across markets in negotiations with common customers.

Do State Bans of Most-Favored-Nation Contract Clauses Restrain Price Growth? Evidence From Hospital Prices.

Policy Points Looking for a way to curtail market power abuses in health care and rein in prices, 20 states have restricted most-favored-nation (MFN) clauses in some health care contracts. Little is known as to whether restrictions on MFN clauses slow health care price growth. Banning MFN clauses between insurers and hospitals in highly concentrated insurer markets seems to improve competition and lead to lower hospital prices. CONTEXT: Most-favored-nation (MFN) contract clauses have recently garnered attention from both Congress and state legislatures looking for ways to curtail market power abuses in health care and rein in prices. In health care, a typical MFN contract clause is stipulated by the insurer and requires a health care provider to grant the insurer the lowest (i.e., the most-favored) price among the insurers it contracts with. As of August 2020, 20 states restrict the use of MFN clauses in health care contracts (19 states ban their use in at least some health care contracts), with 8 states prohibiting their use between 2010 and 2016. METHODS: Using event study and difference-in-differences research designs, we compared prices for a standardized hospital admission in states that banned MFN clauses between 2010 and 2016 with standardized hospital admission prices in states without MFN bans. FINDINGS: Our results show that bans on MFN clauses reduced hospital price growth in metropolitan statistical areas (MSAs) with highly concentrated insurer markets. Specifically, we found that mean hospital prices in MSAs with highly concentrated insurer markets would have been $472 (2.8%) lower in 2016 had the MSAs been in states that banned MFN clauses in 2010. In 2016, the population in our sample that resided in MSAs with highly concentrated insurer markets was just under 75 million (23% of the US population). Hence, banning MFN clauses in all MSAs in our sample with highly concentrated insurer markets in 2010 would have generated savings on hospital expenditures in the range of $2.4 billion per year. CONCLUSIONS: Our empirical findings suggest banning MFN clauses between insurers and providers in highly concentrated insurer markets would improve competition and lead to lower prices and expenditures.

Challenges with Defining Pharmaceutical Markets and Potential Remedies to Screen for Industry Consolidation.

CONTEXT: Dramatic increases in pharmaceutical merger and acquisition (M&A) activity since 2010 suggest we are in the midst of a third wave of industry consolidation. METHODS: The authors reviewed 168 economic, legal, medical, industry, and government sources to examine the effects of consolidation on competition and innovation and to explore how industry attributes complicate M&A regulation in a pharmaceutical context. FINDINGS: The authors find that, in spite of certain metrics that might argue otherwise, consolidation consistently reduces innovation and harms the public good. They also find that several factors within the pharmaceutical industry impede proper evaluation of proposed mergers. Because consumer choice across substitutes is limited, pharmaceutical markets frustrate conventional methods of defining markets. Volume bargaining in the pharmaceutical supply chain and asset managers' common ownership of pharmaceutical firms further complicate the definitional process. Hence, the Herfindahl-Hirschman Index (HHI), one measure used by the Federal Trade Commission and the Department of Justice to screen for concerning M&A activity, sometimes depends on faulty market definitions and fails to capture the implications of consolidation for future market share. CONCLUSIONS: The authors describe ways to improve how pharmaceutical markets are defined, highlight quantitative alterations to HHI to account for common ownership, and propose areas requiring further research.

States' Merger Review Authority Is Associated With States Challenging Hospital Mergers, But Prices Continue To Increase.

States can challenge proposed hospital mergers by using antitrust laws to prevent anticompetitive harms. This observational study examined additional state laws-principally charitable trust, nonprofit corporation, health and safety, and certificate-of-need laws-that can serve as complements and substitutes for antitrust laws by empowering states to be notified of, review, and challenge proposed hospital mergers through administrative processes. During the period 2010-19, 862 hospital mergers were proposed, but only forty-two (4.9 percent) were challenged by states, including thirty-five by states without federal involvement, of which twenty-five (71.4 percent) originated in the eight states with the most robust merger review authority. The twenty-five challenges resulted in two mergers being blocked; three being abandoned; and twenty being approved with conditions, including seven with competitive-impact conditions. Hospital market concentration and prices increased at similar rates in these eight states versus other states, potentially because most challenges allowed mergers to proceed with conditions that did not adequately address competitive concerns. Although these findings do not reveal an optimal state framework, elements of advanced state merger review authority may have the potential to improve poorly functioning hospital markets.

The Association between Hospital-Physician Vertical Integration and Outpatient Physician Prices Paid by Commercial Insurers: New Evidence.

This study assessed the relationship between hospital ownership of physician organizations (known as hospital-physician vertical integration) and facility fees billed to commercial insurers and physician service prices. Healthcare claims came from the IBM® MarketScan® Commercial Database (2012-2016, N = 30,716,800 office visit claims [CPT codes 99211-99215]), and hospital-physician vertical integration measures were from SK&A Office Based Physicians Database provided by IQVIA. Multi-variate, fixed-effect models were used to regress prices on market-level hospital-physician vertical integration; models included geographic market and year fixed effects, claim-level variables, and time-varying market-level variables. Analyses did not find that market-level hospital-physician vertical integration was associated with the billing of facility fees for office visits. However, vertical integration was associated with office visit physician prices for some specialties. A 10-percentage-point increase in vertical integration was associated with a 1.0% price increase for primary care, a 0.6% increase for orthopedics, and a 0.5% increase for cardiology; no such association was found for obstetrics/gynecology or oncology. When comparing metropolitan statistical areas (MSAs) in the bottom quartile of changes in vertical integration from 2012 to 2016 to MSAs in the top quartile, we found the following relative price increases based on predicted values for claims in the top quartile: $1.64 (1.9% of mean 2012 predicted price) for primary care to $2.30 (3.1%) for orthopedics to $3.13 (3.4%) for cardiology. Differences in predicted price accounted for an estimated $45.8 million in additional expenditure on primary care office visits in the top quartile of MSAs in 2016. In summary, market-level hospital-physician vertical integration was positively associated with physician prices for select specialties, but was not associated with changes in the use of facility-fee billing. More evidence on the quality effects of hospital-physician vertical integration is needed, as price increases that are not accompanied by measurable quality improvements should be part of any regulatory review.

Projecting shortages and surpluses of doctors and nurses in the OECD: what looms ahead.

There is little debate that the health workforce is a key component of the health care system. Since the training of doctors and nurses takes several years, and the building of new schools even longer, projections are needed to allow for the development of health workforce policies. Our work develops a projection model for the demand of doctors and nurses by Organisation for Economic Co-operation and Development (OECD) countries in the year 2030. The model is based on a country's demand for health services, which includes the following factors: per capita income, out-of-pocket health expenditures and the ageing of its population. The supply of doctors and nurses is projected using country-specific autoregressive integrated moving average models. Our work shows how dramatic imbalances in the number of doctors and nurses will be in OECD countries should current trends continue. For each country in the OECD with sufficient data, we report its demand, supply and shortage or surplus of doctors and nurses for 2030. We project a shortage of nearly 400,000 doctors across 32 OECD countries and shortage of nearly 2.5 million nurses across 23 OECD countries in 2030. We discuss the results and suggest policies that address the shortages.

Consolidation Trends In California's Health Care System: Impacts On ACA Premiums And Outpatient Visit Prices.

California has heavily concentrated hospital, physician, and health insurance markets, but their current structure and functioning is not well understood. We assessed consolidation trends and performed an analysis of "hot spots"-markets that potentially warrant concern and scrutiny by regulators in terms of both horizontal concentration (such as hospital-hospital mergers) and vertical integration (hospitals' acquisition of physician practices). In 2016, seven counties were high on all six measures used in our hot-spot analysis (four horizontal concentration and two vertical integration measures), and five counties were high on five. The percentage of physicians in practices owned by a hospital increased from about 25 percent in 2010 to more than 40 percent in 2016. The estimated impact of the increase in vertical integration from 2013 to 2016 in highly concentrated hospital markets was found to be associated with a 12 percent increase in Marketplace premiums. For physician outpatient services, the increase in vertical integration was also associated with a 9 percent increase in specialist prices and a 5 percent increase in primary care prices. Legislative proposals, actions by the state's attorney general, and other regulatory changes are suggested.

Forecasting imbalances in the global health labor market and devising policy responses.

BACKGROUND: The High-Level Commission on Health Employment and Economic Growth released its report to the United Nations Secretary-General in September 2016. It makes important recommendations that are based on estimates of over 40 million new health sector jobs by 2030 in mostly high- and middle-income countries and a needs-based shortage of 18 million, mostly in low- and middle-income countries. This paper shows how these key findings were developed, the global policy dilemmas they raise, and relevant policy solutions. METHODS: Regression analysis is used to produce estimates of health worker need, demand, and supply. Projections of health worker need, demand, and supply in 2030 are made under the assumption that historical trends continue into the future. RESULTS: To deliver essential health services required for the universal health coverage target of the Sustainable Development Goal 3, there will be a need for almost 45 million health workers in 2013 which is projected to reach almost 53 million in 2030 (across 165 countries). This results in a needs-based shortage of almost 17 million in 2013. The demand-based results suggest a projected demand of 80 million health workers by 2030. CONCLUSIONS: Demand-based analysis shows that high- and middle-income countries will have the economic capacity to employ tens of millions additional health workers, but they could face shortages due to supply not keeping up with demand. By contrast, low-income countries will face both low demand for and supply of health workers. This means that even if countries are able to produce additional workers to meet the need threshold, they may not be able to employ and retain these workers without considerably higher economic growth, especially in the health sector.

Insurer Market Power Lowers Prices In Numerous Concentrated Provider Markets.

Using prices of hospital admissions and visits to five types of physicians, we analyzed how provider and insurer market concentration-as measured by the Herfindahl-Hirschman Index (HHI)-interact and are correlated with prices. We found evidence that in the range of the Department of Justice's and Federal Trade Commission's definition of a moderately concentrated market (HHI of 1,500-2,500), insurers have the bargaining power to reduce provider prices in highly concentrated provider markets. In particular, hospital admission prices were 5 percent lower and cardiologist, radiologist, and hematologist/oncologist visit prices were 4 percent, 7 percent, and 19 percent lower, respectively, in markets with high provider concentration and insurer HHI above 2,000, compared to such markets with insurer HHI below 2,000. We did not find evidence that high insurer concentration reduced visit prices for primary care physicians or orthopedists, however. The policy dilemma that arises from our findings is that there are no insurer market mechanisms that will pass a portion of these price reductions on to consumers in the form of lower premiums. Large purchasers of health insurance such as state and federal governments, as well as the use of regulatory approaches, could provide a solution.

Consumers Buy Lower-Cost Plans On Covered California, Suggesting Exposure To Premium Increases Is Less Than Commonly Reported.

With the notable exception of California, states have not made enrollment data for their Affordable Care Act (ACA) Marketplace plans publicly available. Researchers thus have tracked premium trends by calculating changes in the average price for plans offered (a straight average across plans) rather than for plans purchased (a weighted average). Using publicly available enrollment data for Covered California, we found that the average purchased price for all plans was 11.6 percent less than the average offered price in 2014, 13.2 percent less in 2015, and 15.2 percent less in 2016. Premium growth measured by plans purchased was roughly 2 percentage points less than when measured by plans offered in 2014-15 and 2015-16. We observed shifts in consumer choices toward less costly plans, both between and within tiers, and we estimate that a $100 increase in a plan's net annual premium reduces its probability of selection. These findings suggest that the Marketplaces are helping consumers moderate premium cost growth.

Differing Impacts Of Market Concentration On Affordable Care Act Marketplace Premiums.

Recent increases in market concentration among health plans, hospitals, and medical groups raise questions about what impact such mergers are having on costs to consumers. We examined the impact of market concentration on the growth of health insurance premiums between 2014 and 2015 in two Affordable Care Act state-based Marketplaces: Covered California and NY State of Health. We measured health plan, hospital, and medical group market concentration using the well-known Herfindahl-Hirschman Index (HHI) and used a multivariate regression model to relate these measures to premium growth. Both states exhibited a positive association between hospital concentration and premium growth and a positive (but not statistically significant) association between medical group concentration and premium growth. Our results for health plan concentration differed between the two states: It was positively associated with premium growth in New York but negatively associated with premium growth in California. The health plan concentration finding in Covered California may be the result of its selectively contracting with health plans.

Avoiding Spending While Meeting Patients' Wishes: A Model of Community-Based Palliative Care Uptake in California from 2014-2022.

BACKGROUND: Community-based palliative care can improve outcomes and avoid unnecessary spending, but the effects of its widespread adoption on health care spending in California is unknown. OBJECTIVE: To estimate the spending avoided if, by 2022, more than 100,000 Californians received community-based palliative care (CBPC) per year. DESIGN: We estimated the 6-month per-patient spending avoided through three mature CBPC programs in California and extrapolated data to predict the total avoided spending statewide over 8 years if enrollment in the three programs proceeded according to our model. RESULTS: If Californians participated in CBPC in the numbers envisioned, in 2014 there would have been a $72 million reduction in intensive hospital based care, while still respecting patients' wishes, and nearly $1.1 billion in spending could be avoided in 2022. Overall hospital spending would be reduced by more than $5.5 billion through 2022. CONCLUSIONS: Existing CBPC programs have the potential to provide care that is both in alignment with patients' wishes and avoids substantial amounts of unnecessary hospital-based spending.

Covered California: The Impact of Provider and Health Plan Market Power on Premiums.

We explain the establishment of Covered California, California's health insurance marketplace. The marketplace uses an active purchaser model, which means that Covered California can selectively contract with some health plans and exclude others. During the 2014 open-enrollment period, it enrolled 1.3 million people, who are covered by eleven health plans. We describe the market shares of health plans in California and in each of the nineteen rating regions. We examine the empirical relationship between measures of provider market concentration--spanning health plans, hospitals, and medical groups--and rating region premiums. To do this, we analyze premiums for silver and bronze plans for specific age groups. We find both medical group concentration and hospital concentration to be positively associated with premiums, while health plan concentration is not statistically significant. We simulate the impact of reducing hospital concentration to levels that would exist in moderately competitive markets. This produces a predicted overall premium reduction of more than 2 percent. However, in three of the nineteen rating regions, the predicted premium reduction was more than 10 percent. These results suggest the importance of provider market concentration on premiums.

Republican States Bolstered Their Health Insurance Rate Review Programs Using Incentives From the Affordable Care Act.

The Affordable Care Act (ACA) included financial and regulatory incentives and goals for states to bolster their health insurance rate review programs, increase their anticipated loss ratio requirements, expand Medicaid, and establish state-based exchanges. We grouped states by political party control and compared their reactions across these policy goals. To identify changes in states' rate review programs and anticipated loss ratio requirements in the individual and small group markets since the ACA's enactment, we conducted legal research and contacted each state's insurance regulator. We linked rate review program changes to the Centers for Medicare and Medicaid Services' (CMS) criteria for an effective rate review program. We found, of states that did not meet CMS's criteria when the ACA was enacted, most made changes to meet those criteria, including Republican-controlled states, which generally oppose the ACA. This finding is likely the result of the relatively low administrative burden associated with reviewing health insurance rates and the fact that doing so prevents federal intervention in rate review. However, Republican-controlled states were less likely than non-Republican-controlled states to increase their anticipated loss ratio requirements to align with the federal retrospective medical loss ratio requirement, expand Medicaid, and establish state-based exchanges, because of their general opposition to the ACA. We conclude that federal incentives for states to strengthen their health insurance rate review programs were more effective than the incentives for states to adopt other insurance-related policy goals of the ACA.