Feisty House hearing portends more battles over consolidation

Politicians and healthcare leaders don't agree on much about the root causes and problems with consolidation in the healthcare sector. More congressional hearings are likely to inflame the debate.

The House Judiciary Committee's Antitrust Subcommittee held a meeting last week on the state of competition among hospitals, doctors and insurance companies since the Affordable Care Act's passage. The rancorous gathering built up anticipation of a Sept. 22 Senate hearing—one in which the CEOs of Aetna, Anthem, Cigna Corp. and Humana are expected to testify.

But outside observers don't foresee congressional grandstanding influencing how the Justice Department evaluates pending deals. “What the enforcement agencies do with mergers is rarely affected by what goes in Congress,” said Lee Simowitz, a partner at Baker & Hostetler who focuses on antitrust law. “These are hearings where people are going to use them for their own purposes.”

Congress decided to examine mergers and acquisitions in the healthcare industry because of the massive deals announced this summer. Anthem is buying rival Cigna for $54 billion, while Aetna is acquiring Medicare Advantage powerhouse Humana for $37 billion.

Healthcare transactions were happening well before these deals and well before the ACA went into effect, said Thomas Greaney, a law professor at St. Louis University, and Dr. Scott Gottlieb, a fellow at the conservative American Enterprise Institute. Gottlieb argued that the ACA has “hastened” these deals, but Greaney said it was wrong to draw a causal relationship. The healthcare reform law depends on new forms of competition among providers and insurers, not monopolies and oligopolies, he said.

American Hospital Association CEO Rick Pollack defended the transactions among his group's members. The ACA's shift toward value-based payments and care coordination is good for the broader delivery system, he said, but not all hospitals can get there alone.

“Many small, stand-alone and rural hospitals are particularly in need of partners,” Pollack said. “The cost of acquiring and maintaining electronic health records … can tip the financial balance of these organizations.”

In prepared testimony, Pollack and others said the pending health insurance acquisitions pose a bigger threat to consumers and healthcare costs. Pollack said the deals “appear motivated by top-line profits.”

Aetna and Anthem have expressed confidence that the government will approve their bids, although both companies may have to divest some health plans in overly concentrated markets. Insurers have more broadly argued that competition among health plans occurs locally.

“The bottom line is that consolidation should be looked at on a case-by-case basis,” said Dan Durham, executive vice president at America's Health Insurance Plans, the lobbying group for insurers.

Durham charged that hospital consolidation is driving higher healthcare prices. Pollack fired back that AHIP relies on “old” and “incomplete” data, noting that recent hospital price growth has been historically low.

However, a body of research shows that hospital and health insurer mergers rarely lead to significantly lower prices for patients. Insurance mergers that try to keep up with the growing size of local health systems should not be viewed favorably by the government, Greaney said. He called this defense the “sumo wrestler theory” and said it's a fallacy to think dominant insurers bargaining with dominant hospitals make the industry more competitive.

“Sometimes we find out that the sumo wrestlers would rather shake hands than compete,” Greaney said.

Small and mid-size physician practices are often caught in the middle as hospitals and payers spar over market share. Dr. Barbara McAneny, a board trustee at the American Medical Association and a practicing oncologist, said the ACA “provides meaningful opportunities for physicians to compete and improve quality, but it is not yet clear whether continuing barriers to market entry can be overcome to achieve the underlying goals of the legislation.”

Those barriers, such as strict antitrust parameters and payer negotiation rules for physician practices, have pushed many doctors to pursue salaried jobs at hospitals instead of running their own independent practices. “We don't believe competition should force physicians to choose employment over self-employment,” McAneny said.