Strengthening the corporatization of healthcare requires checks and balances

President Joe Biden’s recent decree to foster competition in the American economy acknowledges the long-standing fact that over-consolidation of healthcare has not and will not benefit our nation’s patients. In fact, uncontrolled consolidation is fundamentally transforming the healthcare system in this country and putting profit-oriented corporate structures first when it comes to patient care. As consumers continue to grapple with higher prices and fewer choices, there is good reason for policymakers to pay closer attention to them.

Health care mergers and acquisitions are nothing new. Whenever a healthcare business combination is announced, the message to policymakers and consumers rarely strays from a carefully crafted scenario: the transaction will create economies of scale that will improve operations and lead to cost savings. However, a growing body of research shows that consolidation undermines competition and drives up prices. For example, research California Hospital Markets found that the increase in the proportion of doctors in hospital-owned clinics was associated with a 12% increase in premiums on private plans sold in the state market.

A recent study by Avalere for the Physician Defense Institute shows significant growth in physician employment across the country and their acquisition by hospital systems and other corporate structures during 2019, with accelerated growth in the last six months of 2020. In early 2021, Avalere researchers found that only 30% of doctors in the US still practice medicine on their own. Hospitals and other corporate entities, including private equity firms and health insurance companies, now own nearly half of all US medical practitioners. COVID-19 has exacerbated the existing financial, administrative and regulatory burden on independent doctors who were already struggling to keep their private practice afloat. Many doctors have made the difficult decision to close or sell their clinics.

Financial incentives make medical practices an attractive acquisition target for businesses looking to increase their bottom line. Hospital systems have a vested interest in capturing the physician’s patient base in order to maintain a steady stream of revenues from tests, procedures, and other specialized services. Payment policies in favor of hospital-provided services have also contributed to hospital-led consolidation.

Even in this highly regulated industry, the acquisition of medical practices by hospitals and other legal entities occurs without strict regulatory oversight. These transactions make good business sense for corporations, but their impact on patients in the long run is much less obvious. This is why there are increasing calls for regulatory fences around these acquisitions to protect against anticompetitive consequences, such as less choice and higher patient prices, that have been shown to accompany health care market consolidation. Making these changes in ownership more transparent is an important first step.

Federal and state policymakers should consider how to protect against actions by corporate owners that could lead to bankruptcy or otherwise disrupt patient care. Precautions are needed to ensure that physicians, regardless of their type of practice, maintain clinical autonomy and can continue to care for their patients in accordance with their best medical judgment. Corporate ownership policies to reduce costs should not lead to policies that limit patients’ access to medically necessary services, specialist care, or drugs.

Strategies that support physicians’ ability to maintain independent practice and compete with larger organizations are also critical. For example, Congress should lift the moratorium on physician-owned hospitals to stimulate increased competition. Government legal restrictions on corporate medical practice should be tightened. States should also rethink evidence of necessity laws, which limit the ability of doctors to expand services and encourage patients to seek help from expensive hospitals rather than doctors.

Knowledge is power, and today it is sorely lacking. The more regulators and the public know about organizations purchasing physician services, the better the system of checks and balances against the profit game that pays patients more for their care.

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