Rising health care costs and the looming expiration of expanded Obamacare subsidies contributed to the record. government shutdown it ended this week.
But there is another driver of rising costs and prices that is far more widespread and effective: the rapid consolidation of insurers, hospital systems, physician groups, and pharmacies into giants, effectively giving them monopoly power.
Calling it “mutual monopolization,” Barack Richman, the Alexander Hamilton Professor of Business Law at George Washington University, told me, “This is not competition. It's more like a conspiracy. They don't care about the price.”
In our market system, the price of each service is determined through complex negotiations between the insurer and the provider. An insurer may agree to pay grossly inflated prices for a hospital system's laboratories in order to gain access to the cancer center the system needs—and that cancer center may be in a city halfway across the country where the insurer has many clients.
The result is high prices: A patient who visits a hospital lab for a simple blood test could be left with a deductible, copay and coinsurance of $1,000 or more.
Research shows that growing healthcare consolidation is driving up prices, worsening patient outcomes and reducing choices for people who need care. A recent study found that six years after hospitals acquired other hospitals, they raised prices by 12.9%, with hospitals that were involved in multiple acquisitions raising prices by 16.3%.
Anticompetitive consolidation was initially easy for government regulators such as the Federal Trade Commission and the Department of Justice to detect because it involved hospitals acquiring other hospitals or health care providers in their own market. However, in recent years, new types of transactions have become more difficult to control. Giant hospital systems are now acquiring providers from far away. These transactions are known as cross-market mergers. Insurers acquire physician practices and specialty pharmacies, often referred to as vertical mergers.
President Joe Biden has made healthcare merger oversight a priority, releasing 2023 Recommendations which included these new types of consolidation. Its Federal Trade Commission chairwoman, Lina Khan, has been sharply critical of the trend.
Her successor under President Donald Trump has taken a more moderate approach. But in an exclusive interview with KFF Health News, Daniel Guarnera, director of the FTC's Bureau of Competition, said new leadership at the FTC and DOJ has approved the 2023 guidelines “as a framework” for companies planning to merge.
What this means going forward remains unclear. Khan is currently advising New York City Mayor-elect Zohran Mamdani.
