“Well-integrated provider networks may promote coordinated care that improves the allocation of healthcare resources, but they are likely to undermine competitive pressures to keep prices down while maintaining lower quality,” the authors wrote. “Coordinated systems may thus deliver the right care to the right patient at the right time, but at the wrong price.”
Baicker and Levy called for vigilant antitrust enforcement of mergers and acquisitions. The industry's active dealmaking is creating new giants, such as the mega-union of Catholic Health East and Trinity Health. Other players are diversifying, with deals by hospitals to acquire insurers and by insurers to buy hospitals and medical groups.
The economists said the consolidation could give larger organizations the clout to shut out competition at the expense of customers. Regulators should also scrutinize newly emerging networks of independent providers, such as accountable care organizations, which offer hospitals and doctors financial incentives to join together to meet healthcare spending and quality targets and pocket savings.
The Federal Trade Commission and the Department of Justice Antitrust Division jointly released guidance for accountable care organizations after the Patient Protection and Affordable Care Act introduced the new payment model under Medicare. The guidance warns that certain actions in the private market, such as demanding that insurers keep prices and quality information from patients or trying to bundle services outside the ACO to contract with the ACO, could raise competitive concerns.
Douglas Hastings, a healthcare antitrust attorney with Epstein, Becker and Green, said the University of Michigan economists correctly noted that it's not clear what may be the best combination of coordination and competition.
“We need to evaluate the net effect of the suite of new public and private insurance-market policies on both price and quantity…,” Baicker and Levy wrote.
Hastings cited a recent Brookings Institution report that called for the use of cost and quality data in antitrust enforcement. That data could help inform how well networks or mergers serve the goals of improved care at a lower cost.
Enforcement must be aggressive to counter the incentives for consolidation created by the Patient Protection and Affordable Care Act, said Glenn Melnick, a professor of healthcare finance at the University of Southern California.
Medicare's launch of ACOs seeks to shift the financial risk for accelerating health care costs to hospitals and medical groups, he said. Larger organizations are better positioned to absorb those financial risks, he said, but also better positioned to raise rates for private payers.
“These policies that are being pushed by the federal government are going to work to the benefit of Medicare, but no one else,” he said.
Antitrust agencies have power to challenge providers' clout and also raise public awareness of how consolidation affects prices. “We need more information coming out,” Melnick said. “The whole industry lacks transparency at every level. It's unbelievable, how much we spend and how little people know.”
Follow Melanie Evans on Twitter: @MHmevans